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China - The Next Economic Superpower

Updated on March 7, 2017

Background - China's rise to Superpower challenger

China has undergone massive change. Since the early 1980's, its economy has doubled in size every eight years. China has the largest sustained GDP growth in history, and is no longer a low-income country. Public spending on health and education over 50 years has provided a healthy, literate and skilled workforce. But how has this change happened?

After is seized power in 1949, China's communist government kept the country separate and disconnected from the rest of the world. The economy was planned centrally, goods were produced for the consumption of China's own people, and no private wealth was permitted. Government income was spent on improving health, education and life expectancy.

However, from 1986, China's government developed an 'open door policy' to overseas investment. In the 1990's it transformed into a more capitalist economy - allowing individuals to accumulate wealth by producing goods and services, without State interference. But it is still not a pure free-market economy, as most of China's largest companies are either totally or in part State-owned, so any profits are reinvested or ploughed back into State spending on health and education. The government is also very authoritarian and voters' choices are between members of the Communist party. As a country, its political and social organisation is tightly controlled.

Feeding China's demand

China's demand for raw materials to feed its growing economy is so great that:

  • it has accounted for 90% of the global increase in sea traffic so far this century
  • iron ore imports to feed the Chinese steel industry grew 23% in the first four months of 2007
  • it now makes 500 million tonnes of steel a year, 33% of the world's output, and has a steel industry four times larger than that of the USA
  • it is now, by far, the largest producer and consumer of steel in the world - having overtaken the USA in 2001
  • most of China's steel production is used for domestic consumption
  • the construction boom in cities, driven by the rapid economic growth, has led to soaring demand for both steel and cement. China is the largest consumer of cement in the world

China's going shopping

Faced with the increasing costs of raw materials, like iron ore, China has recently tried to guarantee supplies by buying up companies which supply metals such as iron ore, copper and aluminium. In this way, it hopes to control future supplies and prices of raw materials:

  • Chinalco, the state owned Chinese aluminium company teamed up with the American aluminium company, Alcoa, to buy a 12% stake in Rio Tinto
  • China bought Peru Copper Inc.
  • Industrial and Commercial Bank of China Ltd. bought a 20% stake in Standard Bank Group Ltd. (South Africa's largest bank and a major influence on investment in South African mineral reserves).

China is also aiming to guarantee its fuel supplies:us

  • Cnocc Ltd., a Chinese oil corporation, spent $2.7 billion USD buying Nigerian oil fields.
  • China became the main shareholder in PetroKazakhstan. The purchase included oil refineries, petrol stations and a 1000km pipeline overland into China. Kazakhstan has enormous oil reserves, and in 2012 was one of the worlds major producers.

China's iron ore industry
China's iron ore industry

How far has China become a Superpower?

Undoubtedly, China’s economic growth has had major impacts – not only on the demand for fuel and raw materials, but also on the cost of living for everyone else in the world. Its cheap labour rates and drive for economic growth have allowed relentless industrialisation.

In the last decade, China has made remarkable progress. In 2005, only two of the worlds biggest 200 companies were Chinese. However, until recently a few years ago, almost all of China’s wealth was used for domestic reinvestment to create a better infrastructure and to expand the industries producing customer goods for the rest of the world. Its trading position is very strong, and in 2007 it earned $360 billion USD more through exports than imports. Some of the surplus wealth was used by Chinese companies to expand and invest, and by the end of 2007 over 5000 Chinese companies had invested in 172 countries and regions around the world.

The environmental costs of growth

Rapid economic growth in China as been achieved at a high environmental cost:

  • China now has 16 of the top 20 most air polluted cities in the world. The polluted air was blamed for over 400,000 premature deaths in 2003.
  • 30% of China suffers from acid rain, caused by emissions from coal fired power stations. In June 2007 it was estimated that China was opening new coal fired power stations at the rate of two per week. China's CO2 emissions in 2007 were over 6.2 billion tonnes.
  • 70% of China's rivers and lakes are polluted. Water quality in 207 of the Yangtze River's tributaries is not fit for spraying on farmland, yet 1/12 of the Earth's population rely on it for drinking water.

Beijing's dense layer of smog above the city
Beijing's dense layer of smog above the city

Social concerns & China's economic growth

China's economic growth has also been achieved at a social cost:

  • Its rural population has yet to see evidence of China's economic boom.
  • 20% of China's population live on less than $1 USD a day, and most of those who worked on the construction of Beijing's Olympic facilities earned just $4 a day.
  • Child labour was used in some factories manufacturing Olympic souvenirs and toys.
  • Housing in some of Beijing's old, narrow streets was demolished to make way for Olympic facilities. One human rights group estimated that 300,000 people were evicted

Military strength: USA vs China

Criteria
USA
China
Active military personnel
1,400,000
2,335,000
Aircraft (all types)
13,444
2,942
Aircraft carriers
19
1
Submarines
75
68
Desroyers
62
32
Tank strength
8,848
9,150
Despite China's sheer size, the USA is still the number one military power in the world, but China isn't far behind

Do you think China may one day be the top military superpower?

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