The Scale of China's Impact
You can't deny the Chinese economy is blowing away the competition. But for the big picture, take a step back and look at the overall stats
The world is now accustomed to mind-blowing growth numbers coming out of China. On Oct. 19 came yet another one: China reported that third-quarter gross domestic product jumped 10.4% year-on-year after the economy clocked nearly 11% during the first half of 2006. The slight slowdown (at least by China's hypergrowth standards) was greeted with some relief by economists. When it comes to the mainland, observers are actually more worried about an overheated economy that runs off the rails and goes bust than anything else these days.
Even so, GDP growth rates expressed in percentage terms don't always adequately capture China's living-large impact on the global economy. To really drive that point home, it is sometimes helpful to draw together a more eclectic mix of data to underscore the sheer economic scale of contemporary China, as well as the challenges it confronts.
What follows is a portrait of China by the numbers.
China Growth Machine: The mainland economy has basically doubled in size to around $2.2 trillion (as of the end of 2005) thanks to a remarkable five-year investment boom since joining the World Trade Organization back in 2001. Last year, it overtook Britain as the fourth biggest economy behind the U.S., Japan, and Germany.
By the end of the decade, if China can manage 8.5% annual growth rates, its economy could hit $3.2 trillion or so, advance to No. 3, and close in on Japan. Some see China overtaking the U.S. economy in nominal GDP by mid-century.
FX Stockpile: Thanks to years of robust export performance, China's foreign currency stockpile is expected to cruise past the $1 trillion mark just about any day now. That's a number roughly equivalent to the combined economic output of Taiwan, Thailand, and Indonesia. Chinese public and private investors hold about $527 billion in U.S. Treasury and other government agency debt.
Trading Superpower: China is now the world's No. 3 trading nation, exporting and importing about $1.4 trillion worth of goods and services a year. Its global trade surplus hit $102 billion in 2005, roughly triple year-before levels, and is on track to finish the year at more than $150 billion, most economists figure. China's big 2005 bilateral trade surpluses with both the European Union ($127 billion) and the U.S. ($202 billion) continue to send trade hawks in the West into fits of outrage.
Hungry Dragon: Feeding China's industrial machines takes an awesome amount of commodities—and mainland demand has lifted corporate earnings of exporters from Australia to Brazil. Though China represents only about 5% of the global economy, the mainland consumes about 20% of global aluminum and copper, some 30% of steel, iron ore, and coal, and 45% of cement produced each year.
World-Class Pollution: The U.S. still has the dubious distinction of being the biggest emitter of carbon dioxide in the world, but China is No. 2 and gaining. The mainland's emissions jumped 33% during a 10-year period ended in 2002, according to the latest World Bank figures.
Chinese cities rank among the worst in terms of air pollution, and acid rain is a huge problem. Some 20% of the population lives in "severely polluted" areas, and 70% of the country's rivers and lakes are in grim shape. Chinese environmental regulators warn pollution levels could quadruple by 2020 if the country doesn't shift to cleaner energy and industrial practices (see BusinessWeek.com, 9/27/06, "What's It Going to Take to Clean Up China?").
China's Energy Quest: Chinese oil companies are prowling the globe for exploration rights and energy assets in Africa and Central Asia, and with good reason. Once an energy exporter, the mainland is expected to import 75% of its crude—nearly twice the percentage today—by 2020 and consume 10.6% of the world's oil, the U.S. Energy Dept. estimates.
That's why China is embarking on one of the biggest build-outs of nuclear energy capacity in industry history. The mainland is expected to spend $50 billion-plus on some 30 new reactors over the next 14 years to add to the nine it already has in operation.
Construction Nation: Since 1990, Shanghai has erected enough high-rises, from space-age office towers to residential complexes, to easily cover Manhattan. The building frenzy in Shanghai has set off what some fear is a property bubble. Residential and commercial prices are clocking double-digit gains in Beijing, where 2008 Summer Olympic-related construction is fast and furious, and in Shenzhen, a thriving Southern Chinese city in the Pearl River Delta region.
At the same time there is an alarming shortage of affordable housing for low-income families. Only $593 million had been spent on low-rent housing since the early 1990s, according to China's Ministry of Finance.
Military Prowess: China claims it spends $30 billion on its military, but the Pentagon thinks the actual level is three times as much if you factor in foreign weapons purchases, especially from Russia, defense industry subsidies and so on. Beijing is beefing up its "integrated network electronic warfare" ability to disrupt enemy networking information.
It's launching more global reconnaissance satellites and doing research in ground-based laser weapons that will eventually be able to blind or take out enemy satellites. By the end of 2006, Taiwan defense officials claim the mainland will have 800 ballistic missiles, 700 fighter aircraft, 50 new surface warships, and 40 state-of-the-art submarines that could be deployed against its defenses.
Bremner is Asia Regional Editor for BusinessWeek in Hong Kong.