The Chinese Dragon Awakens in a Wary World

Dec 23 2004

Antoaneta Bezlova

BEIJING, Dec 23 (IPS) – As a year of subtle but significant geopolitical shifts draws to an end, China looms ever larger in a world unable to decide whether its rise is an opportunity or a threat.

For better or worse, every ripple from this giant economy, which is driven by the fast-expanding needs of 1.3 billion consumers, can now be felt across the world. The country’s frenetic construction is driving up world prices of nearly every commodity, while large-scale foreign investment is powering a flood of exports, which is bringing down global prices for manufactured goods.

Without China, even the mighty United States could not run its huge trade and budget deficits. China is the world’s second largest buyer of U.S. government debt, as it recycles a 124 billion U.S. dollar trade surplus with the United States.

Not less significant, a series of recent multibillion-dollar acquisitions announced by Chinese companies around the world show that Beijing is aiming for even a bigger role on the global stage. China has long been the world’s strongest magnet for foreign investment and is now sitting on a near 540 billion dollar pile of hard currency, which it seems anxious to spend as the dollar plunges.

Intended buy-offs are in industries that include car manufacturing, minerals, airlines, banks, consumer electronics, oil and telecommunications. Not all of them have taken off. A reported five billion dollar bid to buy Noranda, Canada’s largest mineral company, faltered this autumn amid concerns about Beijing’s potential use of leverage in the North American country.

Nevertheless, the announcements are causing a buzz of excitement around the world.

Officially, China represents less than four percent of the world’s economy. But its spectacular rate of industrial production – which grew by 16.3 percent last year alone – is making its effects felt all over the world. Last year, China accounted for seven percent of global oil consumption, 27 percent of steel, 31 percent of coal and 40 percent of cement.

And just as optimists are busy making plans on how to make money by satisfying China’s growing demand for raw materials — everything from timber to grain –others are looking at China with a feeling of impending gloom.

Take textiles, for instance.

The lifting of global restrictions on the textile trade from Jan.1 means China will be able to flood the world with even more low-cost clothing. The most populous country already accounts for 20 percent of the global textile trade but industry analysts are predicting that this is set to go up by another 50 percent by 2007.

Manufacturers in both rich and poor countries are already feeling the threat. And local textile industries are already lobbying governments to take fresh measures to keep down the volume of imports from China.

The damage of China’s emergence as a textile giant could be particularly devastating for smaller developing countries with less diversified economies, especially in Africa. Earlier this year, the U.S. International Trade Commission issued a report on the impact of quota termination, identifying Lesotho, Kenya and Mauritius as particularly vulnerable.

Yet textile industries in more mature developing countries like Bangladesh, Vietnam and Sri Lanka are also under threat from competitive Chinese clothing produced by a workforce that cannot form independent unions and has one of the worst industrial accident rates in the world.

For the industrialised West, China has also become both a key engine of global trade and major source of instability should, as doomsayers predict, its high-flying economy crashes.

True, Chinese tourists have been pouring to Europe and spending money. Also, European companies have doubled their sales to China during the last four years and the European Union is set this year to become China’s biggest trade partner, bypassing Japan and the United States.

But fears are rising that from cars to textiles, China may soon start forcing closures of factories across Europe.

Take the car industry, for example. By 2010, China expects its car exports to top 50 billion dollars. This year it bid to buy Britain’s last remaining car manufacturer – the MG Rover, but the EU is still uncertain whether the China qualifies as a viable high-end consumer market.

Similar hesitation marks the EU’s protracted decision-making process whether to lift the arms embargo imposed on Beijing after 1989 Tiananmen massacre of unarmed students and demonstrators. EU members seem torn between the lure of China’s market and moral scruples, which back in 1989 dictated that China should be treated as a giant rogue state for murdering its youth.

Supporters of lifting the ban like France and Germany are confident that China is moving in the right direction. But the evidence is slim.

Detractors argue Beijing is blocking democracy in Hong Kong and is threatening to use military force against Taiwan.

Chinese leaders have just announced their intention to enact an anti-secession legislation – the sign of a dramatic hardening of Beijing’s stance towards Taiwan’s independent movement, which may provide the legal ground for launching a war against the island. Taiwan and China have been governed separately since 1949, and Taiwan remains the only functioning democracy in Chinese history.

This year China said it had its first ever peaceful transfer of power. Jiang Zemin unexpectedly stepped down from his post as head of the military after 15 years in power. But hopes that his successor — president and party chief Hu Jintao — will allow more freedom of expression, initiate negotiations with Taiwan and advocate political reforms, have been upset by Beijing’s latest campaign to stifle dissent.

In recent months, the Communist party has rounded and threatened at least half a dozen intellectuals who had been vocal on the Internet and in the media about the country’s growing gap between rich and poor, pervasive unemployment and the increase of big protests in the provinces.

And Beijing is now trying hard to silence the remainder – those that say its growing economic power is propped up beneath a shaky foundation. (END/2004)

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