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The China Challenge? (Excerpt)

Author: Elizabeth C. Economy, C.V. Starr Senior Fellow and Director for Asia Studies
November 20, 2008
TimeOut New York

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China's rise as a global economic power is one of the great success stories of the 20th century. With growth rates averaging over 10% per year for more than 20 years, China is now the fourth largest economy and third largest trading power in the world. As China has developed domestically, it has also become a critical contributor to the global economy. Its quest for resources to fuel its growth has brought new life to the commodity-based economies in Africa, Latin America and Southeast Asia. Its enormous base of low-cost manufacturing has become an essential guarantor of cheap goods throughout the world. And it has helped keep the American economy afloat through its purchase of US debt.

Yet China's continued rise as a world economic and political power is far from assured. The country faces a raft of daunting domestic challenges. Environmental pollution and degradation cost the Chinese economy the equivalent of 10% of GDP annually; more than 190 million people drink water that is so contaminated that it is dangerous to their health. Discoveries of toxic-sometimes deadly-chemicals found in a range of food products are unsurprisingly a source of serious discontent within the Chinese populace. And the Chinese government has failed to provide adequately for the country's social welfare needs.

Underpinning much of China's political crisis is endemic corruption. The result is a socialist country that is more unequal than the world's largest capitalist country, the United States, and one in which the leaders now confront as many as 100,000 popular protests annually.

What China does at home, of course, also has significant implications for the rest of the world. The sheer size of China's economy and its population mean that it affects the world more deeply and more broadly than any other country, with perhaps the exception of the United States. In addition, China's weak governance structure, coupled with the globalized nature of the world, translates into the export of many of China's worst domestic problems.

Exports of melamine-laced products, unsafe toys and public health hazards such as Avian flu and SARS threaten the global community. Even China's failure to develop a social welfare net has international implications: Chinese consumer demand for foreign products remains weak given the necessity of conserving household savings for basic welfare services.

 As China's global presence grows, the world increasingly is looking to China to assume greater responsibility and leadership on issues as wide-ranging as the global financial crisis, Darfur, and climate change. Yet Chinese leaders are reluctant to assume such a mantle of leadership, frequently arguing that the most effective means by which China can help the world is by taking action at home. The world should probably listen. Until China's leaders fix things at home, they can't really tackle the global problems abroad. And without fundamental governance reform-as fundamental as the economic reforms launched 30 years ago by Deng Xiaoping-China's leaders will never tackle their domestic problems successfully nor realize their desire to be a responsible actor internationally.

This article appears in full on CFR.org by permission of its original publisher. It was originally available here.

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