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Who'll benefit first from China's economic boom

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Years ago it was said that if you could add an inch to the shirttail of every Chinese, you could keep the cotton mills of Lancashire operating forever.

It was a bit silly remark. China was desperately poor and thus not an especially big market, despite its huge population.

Today it's not quite so ridiculous, notes Nicholas Lardy, a senior fellow at Brookings Institution, a Washington think tank.

Foreign suppliers are finding China a more attractive market as it becomes more prosperous. China is the second-largest market in the world for cellphones. Coca-Cola is the dominant supplier of soft drinks. Kodak provides more than half of the nation's film and photo paper.

What's happened is that the Chinese economy has grown - and grown, like Alice when she nibbled on the wrong side of the magic mushroom.

Seven years ago, China produced $500 billion worth of goods and services. Today it's $1 trillion. The Chinese economy is now a little smaller than that of Britain or France. But within the next two decades, China could become the third-largest economy in the world, after the United States and Japan, reckons Mr. Lardy.

The 1.2 billion Chinese have a domestic "purchasing power" that amounts to $2 trillion or $2.5 trillion, says Chen Zhao, managing editor of The BCA China Analyst in Montreal. That's a fifth or a quarter of Americans' ability to purchase goods and services.

China was in the news last week with publication abroad of the "Tiananmen Papers" - secret documents relating to the decision to use deadly force against student protesters in 1989.

China remains a one-party, authoritarian state. Though the control of the Communist Party is gradually loosening, China won't be a Western-style democracy for at least 20 years, guesses Mr. Zhao, raised in Beijing, now a Canadian.

The Chinese leadership is aware that continued economic progress requires greater freedom - a shift to free enterprise that belies their party's name.

Signs of progress in recent years have been remarkable:

*Last year Chinese output, after inflation, reached about 8.3 percent. That's magnificent by standards of Western industrial nations. But China needs rapid growth to create jobs for the 3 million plus leaving the farms each year and those further millions laid off by state enterprises.

Nearly 800 million Chinese are of employment age, with 11 million "baby boomers" added annually.

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