Shifting sands of power

By Jin Liqun
0 CommentsPrint E-mail China Daily, August 31, 2010
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All indicators for economic power shifts now point from North to South, and from West to East. The recent ascent of emerging markets has changed the economic and political landscapes. As some in the West see it, developing countries in Asia are becoming global plants with massive manufacturing capacity, flooding OECD (Organization for Economic Co-operation and Development) countries with their products and capital, and accumulating hard currencies in their war chest. This is the picture some Western pundits have painted.

At face value, the wealth shift is a no-brainer. A series of evidence confirms this reality. As of 2008, developing countries were holding $4.2 trillion in foreign currency reserves, more than one and a half times the amount held by rich countries. OECD member countries' share of the global economy in terms of purchasing power parity has dropped from 60 percent in 2000 to 51 percent this year. It is likely to slide further to 43 percent by 2030.

Economic forecasts indicate that the robust performance of developing countries, relative to OECD countries, will continue this year and beyond. According to the International Monetary Fund and the World Bank, while OECD countries will register a growth rate of 2.7 percent this year and 2.8 percent the next, developing countries will grow 5.2 percent and 5.8 percent. If turbo-charged developing Asia is separated, a growth rate of 8.7 percent should be a foregone conclusion.

In the developing world, a number of the lowest-income countries are yet to emerge from the crisis. China is leading the pack in recovery, though, and is recognized as a powerhouse for the global economy. In the first four months of this year, China's imports reached a staggering $157.6 billion, a figure equivalent to nearly 50 percent of debt-ridden Greece's GDP. As Jim O'Neill, global chief economist at Goldman Sachs Group in London, aptly put it: "Every eight months China's importing a Greece."

Developing countries will overtake developed ones in terms of GDP within decades. Granted that this power rebalancing is a definitive trend, and not just a one-off event fattened by the crisis, it is still far more complex than what meets the eye when viewed in all its dimensions. Scratch the surface just a bit, and a less than sprightly structure in the developing world will reveal itself.

Do not just look at the numbers. GDP does not mean a lot unless it is significant in per capita terms. For all the wealth accumulation, it is still very thin on the ground when distributed among the entire population in emerging economies.

As projected by the World Bank, per capita GDP in 2005 dollar terms for the US in 2030 will reach $49,500, much higher than a mere $2,500 for India, or a more significant $8,400 for China. More worrisome are the development indicators for the lowest-income countries: high incidence of poverty, malnutrition, tuberculosis, illiteracy, environmental degradation and other challenges.

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