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Anticipating China’s Finest Hour

Chinese President Hu Jintao presides over a country still shrouded in mystery as far as the outside world is concerned. Poverty resides side-by-side with extreme wealth, the downtrodden with extremely powerful party bosses, and multinational businesses with mom-and-pop vendors, artisans, and factory laborers. You can find enough to both celebrate and mourn in China.

The country's economy, for instance, roared to a 10.5 percent expansion in 2010 and is projected to do even better this year — hence efforts to stem inflation and curb over-enthusiastic business lending by financial institutions. Yes, that's correct. While politicians and small business owners in the US and Europe are begging banks to start lending again, China is instead tightening lending requirements and repeatedly raising borrowing rates and bank capital reserves. Reports indicate bank lending in China soared to between $146 billion and $220 billion in January alone.

The total of new loans in 2010 was estimated to be approximately $1 trillion, down from $1.4 trillion in 2009. The double-digit economic expansion China rang up in 2010 built on top of the sizzling 9.2 percent growth from 2009. (Click here for additional information on China's GDP. Also see China: Lending Restrictions and Beijing’s Predicament for information on how China's surging growth is becoming a problem for the country's economic regulators.)

That China is in an enviable position in the comity of nations is not in doubt. The country's external debt as a percentage of gross national income (GNI) is 8.7 percent, according to the World Bank, which interestingly does not offer similar data for the major developed nations, including France, the UK, the US, and Japan. I am still trying to find out why this information is not available for these countries.

Also, China is now the world's second-largest economy and its growth trajectory could push it pass the US to make it the No. 1 global economic power in two to three decades, according to some estimate. By the way, countries with high national debt and falling assets prefer to cite gross domestic product (GDP) rather than GNI, because the comparisons are more favorable.

As President Hu wraps up his days-long visit to the US, it's important to focus not just on how far China has come in improving its national fortune and opportunities for its citizens, local businesses, and the world, but also ponder how far it can still go. Obviously, China can still do better on a wide range of subjects and issues, including its human rights record and improving and opening up the political system to full citizen participation.

On the economic front, China's rise to the No. 2 position offers both opportunities and challenges. How China tends its economic growth will affect, not just the country and its citizens, but also the entire globe. What this means is that Hu and other Chinese leaders would have to pay even closer attention to the country's obligations to trading partners, other countries, and general citizens of the world.

China has received much from everyone, including the international community that poured billions in investment into the country and helped lift its economy from the depths of poverty, but also from its own citizens who similarly poured their sweat into making this a better country than it was a mere 20 years ago.

High-tech companies played and are playing a major role in China's development. The industry supply chain is now anchored in China, and whatever happens to the country will help or hurt high-tech firms globally. That's why we cannot afford to stay silent on how China evolves.

Already, we are seeing tantalizing glimpses of what China can become, but we've also seen its government in less flattering light, in how citizens were on occasion poorly treated and businesses — local and international — sometimes inadequately represented or supported with the legal framework and other infrastructure they need to be their best.

China can overcome all these teething problems as its global status improves. In my opinion, the country's finest hour is ahead, but first, the leaders must steer it successfully through a terrain filled with difficult social, political, and economic challenges. Countries that helped China develop its economy must insist the country fulfill its obligations, not just to itself and its citizens, but also to the entire world.

11 comments on “Anticipating China’s Finest Hour

  1. Jay_Bond
    January 20, 2011

    I agree that China is going to have to review some of its policies in order to keep up with the growth. Much like the U.S. China is now being looked upon as a globally financial superpower. If China's economy was to take a serious downturn the results would be felt worldwide.

    As an employee of a large international company, I have watched my company make extensive growth in China and the Asian market. We have expanded with a new production plant in China to help with the growth. We are banking on large growth in the Asian market. By expanding overseas, this also helps global customers receive their products quicker and saves on transportation costs.

    China has many skeptics. There are many people out there that feel not only is China growing at such a fast rate, they have concerns over their communist ties. I feel that China needs to step forward and show the world that they are serious about being relied upon in the global economy. By reviewing some of their political standings and helping foreign companies gain ground in China, they can gain even more trust from global investors. 

    China has a bright future ahead. If they can continue their economic growth, they will not have to worry about a shortage of companies or their money gaining a permanent home in China.

     

  2. Barbara Jorgensen
    January 20, 2011

    Great analysis on how companies can look at China as an opportunity rather than a competitor or a black hole for jobs. It's true there will have to be changes, and there are areas that China can be more open in, such as less control of the media and information coming out of China. But there have been announcements this week–a big one from GE–in which partnership with China netted US jobs. Your are right–China's leaders have the chance to inspire not just their own citizens but the world's as well.

  3. Anand
    January 20, 2011

    Nice article Bolaji,

       I agree with you that chinas finest hour is ahead but I am not sure if things will change drastically in future. China will continue to be communist country with still shrouded in mystery. It did little to stop the IP infringment in china, it did little to stop the human right violation (remained absent for Nobel peace ceremony and forced its alliest to remain absent), artificially kept the Yuan valuation low, so many cyber attatcks on other nations, list goes on. I dont know what will be the fallout on world politics if china becomes No 1 economy and I dont think any country has any say in chinas policy matters because they simply wont listen to anyone.

     

     

  4. Taimoor Zubar
    January 21, 2011

    “While politicians and small business owners in the US and Europe are begging banks to start lending again, China is instead tightening lending requirements and repeatedly raising borrowing rates and bank capital reserves.”

    I do agree that the effective economic policies by the Chinese government is one of the major reasons behind the rapid growth in the economy. However, is the policy by Chinese government to tighten the lending to businesses a good one? Is it because of this policy that the economy has maintained a consistent growth, or is the policy coming in the way of a much higher growth? Would love to read experts' comments on this.

  5. Ashu001
    January 21, 2011

    Taimoor,

    The Chinese are tightening because they have no choice.China today is saddled with Double Digit Inflation and Asset Bubbles(especially in real estate);all because of Cheap Credit and Easy Money.If the Authorities don't rein in either of these two monsters today,the crash down the line will be extremely,extremely terrible[There is a strong possibility that it will make the Great Recession in the US feel like a walk in the park).

    Regards

    Ashish.

  6. DataCrunch
    January 21, 2011

    Bolaji, I had to check out your statement that the World Bank does not offer data on external debt as of percentage of GNI for developed nations and sure enough you are correct, which I also found interesting.  Anyway, since I already dug up the info, I figured I would share what the World Bank does offer on the other nations (years 2005-2009, but you can get data for 20 years).  Sorry for the long post.  

    Source: The World Bank

    External debt stocks (% of GNI)

       

    Country Name

    2005

    2006

    2007

    2008

    2009

    Afghanistan

     

    11.32

    19.38

    19.62

     

    Albania

    24.02

    25.98

    25.93

    30.38

    40.25

    Algeria

    17.35

    5.08

    4.32

    3.43

    3.83

    American Samoa

     

     

     

     

     

    Andorra

     

     

     

     

     

    Angola

    44.44

    23.87

    22.81

    21.48

    28.21

    Antigua and Barbuda

     

     

     

     

     

    Argentina

    70.76

    55.47

    45.63

    37.01

    40.13

    Armenia

    36.60

    30.36

    30.55

    27.49

    55.29

    Aruba

     

     

     

     

     

    Australia

     

     

     

     

     

    Austria

     

     

     

     

     

    Azerbaijan

    17.61

    14.13

    12.85

    10.53

    12.09

    Bahamas, The

     

     

     

     

     

    Bahrain

     

     

     

     

     

    Bangladesh

    28.99

    30.38

    28.96

    26.43

    23.97

    Barbados

     

     

     

     

     

    Belarus

    15.67

    14.53

    23.05

    20.51

    35.56

    Belgium

     

     

     

     

     

    Belize

    101.11

    95.22

    97.03

    89.44

     

    Benin

    36.15

    13.90

    14.11

    13.75

    16.15

    Bermuda

     

     

     

     

     

    Bhutan

    81.90

    81.45

    65.10

    56.82

    57.65

    Bolivia

    62.91

    46.84

    39.53

    34.26

    34.46

    Bosnia and Herzegovina

    54.85

    56.53

    56.11

    43.47

    54.59

    Botswana

    4.75

    3.65

    3.55

    3.29

    14.15

    Brazil

    21.57

    18.02

    17.65

    16.29

    17.90

    Brunei Darussalam

     

     

     

     

     

    Bulgaria

    57.58

    68.16

    86.71

    84.02

    90.37

    Burkina Faso

    36.86

    19.50

    21.47

    21.21

    22.89

    Burundi

    170.29

    155.14

    149.47

    123.92

    38.91

    Cambodia

    58.21

    50.65

    45.47

    42.59

    45.04

    Cameroon

    45.10

    18.32

    14.88

    12.20

    13.62

    Canada

     

     

     

     

     

    Cape Verde

    49.21

    49.12

    44.35

    42.08

    47.18

    Cayman Islands

     

     

     

     

     

    Central African Republic

    75.66

    68.58

    56.66

    48.59

    19.97

    Chad

    35.74

    33.31

    30.94

    26.12

    28.63

    Channel Islands

     

     

     

     

     

    Chile

    42.17

    37.43

    38.74

    40.84

    46.72

    China

    12.52

    11.91

    10.58

    8.29

    8.68

    Colombia

    27.11

    24.31

    21.85

    19.98

    23.61

    Comoros

    75.87

    73.51

    62.49

    53.09

    50.97

    Congo, Dem. Rep.

    156.82

    138.07

    128.46

    117.31

    121.42

    Congo, Rep.

    152.39

    128.55

    112.02

    77.28

    83.77

    Costa Rica

    33.79

    32.07

    32.98

    31.75

    28.07

    Cote d'Ivoire

    76.15

    76.94

    73.31

    56.00

    53.00

    Croatia

     

     

     

     

     

    Cuba

     

     

     

     

     

    Cyprus

     

     

     

     

     

    Czech Republic

     

     

     

     

     

    Denmark

     

     

     

     

     

    Djibouti

    52.43

    52.91

    70.18

    63.84

    67.18

    Dominica

    101.28

    84.30

    89.17

    84.02

    69.95

    Dominican Republic

    22.04

    25.09

    25.85

    23.15

    24.61

    Ecuador

    49.13

    43.44

    40.66

    32.69

    23.27

    Egypt, Arab Rep.

    33.83

    28.38

    25.92

    20.35

    17.64

    El Salvador

    52.63

    52.76

    48.07

    46.86

    54.26

    Equatorial Guinea

     

     

     

     

     

    Eritrea

    62.35

    61.69

    63.00

    58.57

     

    Estonia

     

     

     

     

     

    Ethiopia

    50.60

    15.06

    13.65

    11.10

    17.63

    Faeroe Islands

     

     

     

     

     

    Fiji

    6.09

    11.88

    10.51

    10.72

    14.21

    Finland

     

     

     

     

     

    France

     

     

     

     

     

    French Polynesia

     

     

     

     

     

    Gabon

    50.30

    52.99

    28.33

    17.58

    22.31

    Gambia, The

    160.24

    158.40

    121.76

    57.81

    75.35

    Georgia

    29.48

    24.90

    22.25

    26.76

    40.03

    Germany

     

     

     

     

     

    Ghana

    63.57

    25.28

    30.15

    30.06

    37.34

    Gibraltar

     

     

     

     

     

    Greece

     

     

     

     

     

    Greenland

     

     

     

     

     

    Grenada

    77.29

    91.89

    92.51

    82.76

    91.95

    Guam

     

     

     

     

     

    Guatemala

    40.86

    41.14

    43.21

    38.43

    38.78

    Guinea

    108.90

    118.81

    80.89

    88.59

    48.31

    Guinea-Bissau

    349.49

    336.70

    289.36

    243.11

    253.22

    Guyana

    151.16

    139.49

    70.77

    72.41

     

    Haiti

     

     

     

     

     

    Honduras

    56.19

    40.55

    27.56

    25.61

    25.91

    Hong Kong SAR, China

     

     

     

     

     

    Hungary

     

     

     

     

     

    Iceland

     

     

     

     

     

    India

    14.46

    16.81

    16.52

    18.58

    18.22

    Indonesia

    49.40

    35.91

    32.31

    29.70

    30.21

    Iran, Islamic Rep.

    11.61

    8.84

    7.45

    4.16

    4.09

    Iraq

     

     

     

     

     

    Ireland

     

     

     

     

     

    Isle of Man

     

     

     

     

     

    Israel

     

     

     

     

     

    Italy

     

     

     

     

     

    Jamaica

    62.34

    70.85

    86.89

    74.03

    77.75

    Japan

     

     

     

     

     

    Jordan

    59.03

    52.24

    47.00

    29.68

    28.27

    Kazakhstan

    84.54

    101.25

    104.11

    94.20

    112.96

    Kenya

    34.28

    29.07

    27.09

    24.39

    26.47

    Kiribati

     

     

     

     

     

    Korea, Dem. Rep.

     

     

     

     

     

    Korea, Rep.

     

     

     

     

     

    Kosovo

     

     

     

     

    6.42

    Kuwait

     

     

     

     

     

    Kyrgyz Republic

    85.48

    85.19

    66.77

    48.95

    65.76

    Lao PDR

    110.06

    101.88

    105.84

    93.78

    95.51

    Latvia

     

     

     

     

     

    Lebanon

    107.62

    110.98

    99.36

    81.54

    70.69

    Lesotho

    39.40

    34.25

    32.46

    33.68

    33.21

    Liberia

    939.73

    937.19

    668.88

    465.00

    257.46

    Libya

     

     

     

     

     

    Liechtenstein

     

     

     

     

     

    Lithuania

    45.08

    63.41

    78.50

    69.72

    85.25

    Luxembourg

     

     

     

     

     

    Macao SAR, China

     

     

     

     

     

    Macedonia, FYR

    51.61

    51.65

    53.43

    49.74

    62.17

    Madagascar

    70.43

    27.44

    23.44

    22.16

     

    Malawi

    113.14

    27.91

    23.46

    23.84

    24.75

    Malaysia

    39.52

    36.25

    33.84

    30.92

    35.80

    Maldives

    53.99

    55.59

    62.31

    59.24

    59.98

    Mali

    63.94

    29.99

    27.88

    24.36

    29.65

    Malta

     

     

     

     

     

    Marshall Islands

     

     

     

     

     

    Mauritania

    121.40

    58.43

    62.01

    55.63

    66.60

    Mauritius

    12.36

    9.48

    8.52

    6.60

    8.36

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  7. bolaji ojo
    January 21, 2011

    Dave, Thanks. You just dug up the evidence of what's ailing many Western countries: debts. Politicians and economists in the West will tell you they prefer to use GDP rather than GNI but the comparisons are always unfavorable when you are saddled down with too much debt. In the case of the United States, national debt is expected to reach $14 trillion this year! That's not something you want to trumpet. 

    The numbers can be calculated, though. US gross national income in 201 was estimated at $14.1 trillion, according to the World Bank and GDP at $14.7 trillion, according to the CIA World Fact Book. If total debt rise as expected to $14 trillion, that would put it at 95.9 percent of GDP! The CIA World Fact Book put US public debt as percentage of GDP at 59 percent (estimated) in 2010.

  8. Anna Young
    January 22, 2011

    There is no doubt that China's finest hour lies ahead but China still needs to improve in its relations with various countries.

    I note particularly China's is adopting a very stubborn or arrogant approach in its response to critics who feel that China in its pursuit of being the no1 global economic  superpower is undermining its international obligations.

    What is of most concern is China refusing to take heed to any advice concerning their policies, a point raised by Anandvy. China is already demonstrating that once in power, it would do whatever it likes and there is nothing anyone can do about it. I have my concerns for the future.  

  9. hwong
    January 22, 2011

    China's socio-economic condition will continue like this: the rich gets alot more richer and the poor gets extremely poor.  The standard of living cannot be worse for those poor folks who barely make $5 a month in the village. Then there will be so many societal problem with this bigger and bigger status gap. More crime will occur as a result.

    This is exactly the opposite of what the country has set out to achieve in the earlier communism centuries. During those times the government arrests the capitalist and all their family members (such as  landlords or business owners) for claiming that they exploit the lower class. And today that is what's happening. It's rather sad.

  10. Ms. Daisy
    January 22, 2011

    Bolaji:

    Thank you for the article and your raising our awareness of the double standards of the West. A GNI of 95.9 percent or even the “politically correct” 59 percent for the United States is nothing good to write about. How are the mighty falling? The sad part is the deep hole the US is because of an unncessary war in IRAQ and over stretched military that is policing the world at the expense of the citizens.

    Chinas future is scary to contemplate. The unpredictability of the Chinese leadership is always a concern, but we should be really concerned when China gets absolute power as the # 1 economic power.

  11. Eldredge
    January 23, 2011

    Anna, I share your concerns.  We should not be too naive, especially in light of the practices used in the past.

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