China and a global power shift in the making

James F. Hoge, Jr. , editor of Foreign Affairs, just published an article on Foreign Affairs, entitled “A Global Power Shift in the Making.” He augured in his article that “global power shifts happen rarely and are even less often peaceful. Washington must take heed: Asia is rising fast, with its growing economic power translating into political and military strength. The West must adapt — or be left behind. ”

China, of course, has occupied many pages in this long article.

“Today, China is the most obvious power on the rise. But it is not alone: India and other Asian states now boast growth rates that could outstrip those of major Western countries for decades to come. China’s economy is growing at more than nine percent annually, India’s at eight percent, and the Southeast Asian “tigers” have recovered from the 1997 financial crisis and resumed their march forward. China’s economy is expected to be double the size of Germany’s by 2010 and to overtake Japan’s, currently the world’s second largest, by 2020. If India sustains a six percent growth rate for 50 years, as some financial analysts think possible, it will equal or overtake China in that time.

Nevertheless, China’s own extraordinary economic rise is likely to continue for several decades — if, that is, it can manage the tremendous disruptions caused by rapid growth, such as internal migration from rural to urban areas, high levels of unemployment, massive bank debt, and pervasive corruption. At the moment, China is facing a crucial test in its transition to a market economy. It is experiencing increased inflation, real-estate bubbles, and growing shortages of key resources such as oil, water, electricity, and steel. Beijing is tightening the money supply and big-bank lending, while continuing efforts to clean up the fragile banking sector. It is also considering raising the value of its dollar-pegged currency, to lower the cost of imports. If such attempts to cool China’s economy — which is much larger and more decentralized than it was ten years ago, when it last overheated — do not work, it could crash. ”

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