The vehicle that has created the opportunity for China to emerge as a great power has been its superior economic performance. Since Deng Xiaoping's announcement in the late 1970s of China's "Four Modernizations" Program, an effort designed to bring about economic reform and an opening to the outside world, China has experienced extraordinary growth. According to the State Statistics Bureau, the Chinese economy grew 9.7 percent in 1996 and was predicted to grow 10.5 percent in 1997. China has had the world's fastest growing economy for the past several years. For the past 15 years, it has experienced nearly a 10 percent growth rate. Even the most pessimistic of analysts believe that China wil likely grow at a rate of at least 5 percent per year, which means the gross national product (GNP) could double every 12 years. The real question for China is not whether it will continue to grow, but how quickly it will continue to do so.
There is no economic or systemic reason why China's economy could not continue expanding rapidly for at least the next decade. Many other poor countries have been able to sustain growth for prolonged periods; Japan saw 10 percent growth from 1950 to 1970, South Korea 9 percent per year from 1962 to 1987, and Indonesia 6 to 8 percent for the past 28 years. High growth is a function of adopting modern production processes and eliminating inefficiencies. China can do both. A high savings rate (one-third to two-fifths of national income) means that it can afford to invest in neccesary advanced technology. A bloated state sector implies abundant waste (a recent survey found as many as 90 percent of state-owned enterprises were overstaffed, with the average level of surplus workers at 25 percent).
One might wonder what has taken China so long to achieve this economic growth. It has substantial national resources, a reasonably well-educated labor force, a large territory and population, and a high national savings rate. But as China began to shift from a traditional planned economy (reflected in economic policies adopted between 1949 and 1978) to a socialist market economy, the extensive economic expansion was able to occur. By the 1990s, China's role in the international community was transformed. Deng Xiaoping embraced the international market both for goods and capital as well as capital investment and left Maoist ideology that supported the national policy of economic independence. The result was that by 1993, China was the world's 10th largest exporter, 10th largest importer, and the largest recipient of foreign investment. Replacement of inefficient enterprises, reformation of the market sector, and allowance for privatization of economic enterprise have all helped stimulate the domestic economy. This economic growth has made some believe that China will become the world's largest economy by 2010. According to the international Monetary Fund, China is already the world's second-largest economy.
To Be Continued
