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Change of Growth Pattern Matters

Had a broad picture been drawn between the dynamics of globalization and the Chinese economy, Lester Brown's comparative analysis of China's growing appetite for resources might help outsiders as well as domestic policy-makers better understand the challenges and opportunities facing China.


In a report released by the Earth Policy Institute on February 16, Brown, president of the Washington-based Environmental Research Group, claimed that China is replacing the United States as the world's leading consumer.


"Although the United States has long consumed the lion's share of the world's resources, this situation is changing fast as the Chinese economy surges ahead, overtaking the United States in the consumption of one resource after another," he wrote.


Statistics that seemingly point to such a tendency rouse mixed feelings about China's growth story.


Data in the report shows that among the five basic commodities grain and meat, oil and coal, and steel China has outstripped the US in consumption of all but oil.


As to consumer goods, sales of almost all household appliances in China have beaten that of the United States quite considerably. Though China still trails the United States in use of automobiles and personal computers, sales of such products are also taking off nowadays.


Another key phenomenon Brown was keen to highlight was that China, along with Japan, is buying heavily into US treasury securities to help the world's leading debtor nation run the largest fiscal deficit in its history.


Given all this, the author not only jumped to the conclusion that China is eclipsing the United States as the leading consumer nation but also ventured to predict that if the last century was the American century, this one looks like it will belong to the Chinese.


At first glance, the report seems to have made a bold statement about China's future growth prospects.


If so, that would represent a stark contrast from the suspicion Mr Brown expressed a decade ago by asking "Who will feed China?"


After all, if a country is to declare itself an economic superpower, it certainly will, at least, be able to feed its population, no matter how big it may be.


Yet, as Mr Brown insisted, the old matter of China's food security remains a serious problem in the new century in spite of its remarkable economic progress in the past decade.


Five bumper harvest years between 1995 and 1999 bolstered Chinese policy-makers' confidence that the "food security" curse had been lifted.


But as continuous lean years and diminishing cultivated areas drastically eroded the country's grain reserve in recent years, the Chinese Government has been alerted to the emerging possibility of inadequate domestic grain supply in the near future, as well as the country's food insecurity in the longer term.


Last year, unprecedented policies of support enabled the country to achieve an increase in grain output for the first time since 1999. Nevertheless, the dire reality that the country's land-consuming urbanization drive has yet to hit full force allows little optimism.


Besides, China's mainland population reached 1.3 billion last year, and is projected to hit 1.6 billion by 2030 before it finally shrinks.


Because of the country's huge population, which outnumbers that of the US by roughly 4.5 times, there should not be too much surprise that China consumes more food than the United States does. China has already shifted its development emphasis from feeding and clothing its people to building a generally well-off society.


It is natural that the most populous country in the world takes in more food than any other country. This fact amounts to neither a manifestation of China's economic strength nor a cause for panic about the burden China might put on the world grain market.


Instead, the long-term strain China puts on its food supply provides a prism through which foreign observers can interpret the underlying difficulties that China must overcome to pursue sustained growth.


For Chinese policy-makers, it serves as a perennial reminder of a priority they must put on the top of their agenda to deliver the nation's modernization dream.


As a veteran observer of China's food security issues, Lester Brown was astute to identify the role the different tastes of the Chinese and Americans play in explaining why China leads in the consumption of both wheat and rice while the latter eats more corn.


His report was also objective enough to point out that it was China's excessive dependence on coal as its major source of energy, and the country's massive construction phase of development that bid up its consumption of coal and steel far above US levels.


Most of the comparisons the author made between the two countries' consumption of specific items appear quite reasonable in themselves. However, the catalogue of China's growing appetite for food and commodities the report pieced together gave the impression that China is rising by engulfing the world's resources.


Such an interpretation is misleading. It can provide ammunition to those critics who are either reluctant or unprepared to accept the rise of China.


Surely blaming China does not sell as well as it used to, since more and more countries have regarded the rise of China as an opportunity rather than a threat to their own economic development. But any unnecessary misunderstanding would only stand in the way of turning the Chinese economy into one of the key growth engines from which the world can benefit.


It is true that the China factor accounts for much of recent price hikes in the international commodities market.


However, by missing a grand background that is of far-reaching significance to the world economy, Brown's report failed to grasp the thrust of China's growth story.


Thanks to accelerated trade liberation and globalization in recent years, China has made full use of its comparative advantages to benefit from, as well as contribute to, the new international division of labor. Labor-intensive manufacturing jobs are moved into developing countries while industrialized countries focus on creating high value-added jobs.


It was China's unremitting effort to speed up reform and opening up that underpinned its development miracles. For the past quarter of a century, the Chinese economy has on average grown by more than 9 percent year-on-year.


Since its entry into the World Trade Organization in 2001, China has further quickened its integration into the world economy by moulding itself into the world's workshop.


China's record trade volume that reached US$1.15 trillion last year, equal to about 70 percent of its gross domestic product, bears full testimony to the openness of the Chinese economy.


The unprecedented amount of foreign direct investment China actually utilized last year, which totaled US$60.6 billion, also proves the country's attractiveness to foreign investors.


Obviously, the combination of a cheap but relatively skillful labor force and improved infrastructure has made China an ideal manufacturing base for almost all multinationals.


So, while other nations share via trade and foreign direct investment the strong growth momentum of the Chinese economy, which soared again by 9.5 percent last year, competitive Chinese exports are also benefiting global consumers.


With China emerging as a global manufacturing centre, the input of resources will, of course, surge as the output multiplies.


Broadly speaking, China is marching towards becoming a big consuming nation.


But the pace of that course will hinge on when the Chinese economy tests the limits of its domestic resources and what it can import.


The tough measures the Chinese Government took last year to cool down the economy demonstrated a firm recognition of the urgency to change the country's extensive growth model featuring high pollution, high consumption of energy and low efficiency.


To a certain extent, Brown's report has a merit in giving a timely warning.


But as China steadily pursues a more sustainable approach to development, it is far too early to say the country is the next leading consuming nation.


In a narrow sense, consumption, along with investment and trade, serves as one of the three driving forces behind economic growth. Yet, in sharp contrast to its breakneck investment growth and soaring trade volume, China's domestic consumption growth remains unimpressive.


Though Chinese consumers' enthusiasm for buying cars in recent years has really excited automobile giants across the globe, to tap into the huge potential of a market of 1.3 billion remains a goal for both foreign companies and the Chinese Government.


Hence, considering the wide income gap between China's urban and rural residents and that between urban rich and poor, the rise of China's consumer economy is not that optimistic.


(China Daily March 1, 2005)


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