Pang Zhongying

Economic weather getting stormy

Some Western observers are unrealistically optimistic about China's economic growth in the post-global economic crisis era, and have concluded with geopolitical implications that "the world power is further shifting East". These arguments on China's economic and political perspective are improper and irresponsible, and if governments in Western countries endorse them they may end up misjudging China's strategic position.

China has indeed experienced fast economic growth during the past three decades. But its superb performance doesn't necessarily mean a "trouble-free" future because it is unlikely to sustain that growth momentum. In fact, its economic growth faces tremendous challenges both at home and abroad.

At home, hundreds of millions of Chinese still work for low wages. They may have powered China's economic development, but they can hardly meet all their needs and prepare their next generation for a better future. More than anyone else, it is they who deserve higher wages. Indeed, some of them have already started demanding higher pay. With more and more workers set to follow their example, labor cost is set to rise across the country.

The country's irrational income distribution system is widening the gap between the rich and the poor further. To let more workers share the fruits of economic growth and maintain social stability, the authorities have intensified their efforts to adjust the income distribution system, so that a greater part of the national income flows to the workers.

China achieved an unprecedented growth rate because it had huge amounts of natural resources to fuel its reform and opening up. But by the end of the last century and beginning of this century, China had begun facing a shortage of natural resources. Slowly, China has become a resource-poor country in terms of per capita share of resources.

Added to that is the challenge of environmental degradation and climate change. It's highly unlikely that China will enjoy fast economic growth rate without checking its environmental deterioration.

In fact, Chinese leaders realized the country's disadvantage in resources and its fragile ecosystem even before the global financial crisis. That's why at the 17th National Congress of the Communist Party of China they decided to make "economic growth pattern transformation" a serious strategic task. China's sustainable development depends on whether it can persist with its "scientific development" and "economic restructuring".

On the overseas front, China's largest markets have been the US and the European Union (EU), the world's two major economies. But in the post-crisis era, the US can hardly continue to drive China's growth. The Barack Obama administration has made it clear to major exporting countries that the US is unwilling to become "the ultimate consumer" again and Washington has been complaining of "global economic imbalance" and trying to counterbalance this by exerting pressure on its trade partners. The US is trying to not only expedite the yuan's revaluation, but also stimulate its domestic demand, and even devise a fresh industrial strategy.

Similarly, the crisis in the eurozone is changing the EU's role as "the ultimate consumer". And because of the resultant competition trade frictions between the EU and China have increased.

The robust growth momentum of the world economy and the Chinese market both over the past two decades brought out the best in each other, forming a virtuous circle. The world economy prospered after the Cold War largely because its growth potential was realized by global marketization, new techniques, such as the Internet, and booming financial markets. The collapse of the Soviet Union and China's reform and opening up powered globalization, making it the most powerful economic driving force. China has been a major contributor to the fast growing world economy for the past 20 years, with the majority profit of many of the world's top multinationals coming from the Chinese market.

But the world economy has now entered a phase of slow growth and there are indications that the period may last long. This scenario adds to China difficulties in restructuring its economic strategy in the next five years (12th Five-Year Plan period). And a possible economic slowdown in China will leave a less powerful engine for the world economy. China has been part of a major part of the globalization process, and the relationship between China and the rest of the world embodies "one honors all and one dams all", that is, "interdependence", as claimed by some US experts. So it is unlikely that China can outshine others if the world economy gets into trouble and the global power balance shifts. Because of the internal and external factors China, in fact, faces more severe challenges than the West, and is likely to do so in the near future.

The author is professor of international relations at Renmin University of China.