2nd
January 2008
Here
comes the world's newest superpower. The rest of the
world is gloomily contemplating economic slowdown and
even recession. Not in Beijing. China is set to make
2008 the year it asserts its status as a global colossus
by flexing frightening economic muscle on international
markets, enjoying unprecedented levels of domestic
consumption and showcasing itself to a watching world
with a glittering £20bn Olympic Games.
The world's most populous
nation will mark the next 12 months with a coming-of-age
party that will confirm its transformation in three
decades from one of the poorest countries of the 20th
century into the globe's third-largest economy, its
hungriest (and most polluting) consumer and the engine
room of economic growth.
Once regarded at best as
a sporting also-ran, China is widely tipped to top the
medals table in the Beijing Olympics in August, an event
in which the country's leadership is investing huge
importance and prestige.
It will be a celebration
viewed with consternation by many, as China's
authoritarian regime shows little sign of relaxing its
grip on power and continues to expand its influence
overseas from the oil fields and metal mines of Africa
to the City of London. Appropriately, 2008 marks the
Year of the Rat, an animal considered in Chinese
folklore to be a harbinger and protector of material
prosperity.
Britain will feel the
full power of the new superpower's confidence. This
month, for the first time, China's state-controlled
banks will begin spending some of its $1.33trn (£670bn)
in foreign currency reserves on London's financial
markets. Beijing has ruled that Britain should become
only the second destination after Hong Kong to be
allowed to receive investors' money via so-called
"sovereign funds" – the huge state-controlled surpluses
built up by cash-rich economies from Qatar to South
Korea. Throw in the biggest round of Chinese art
exhibitions ever to tour these islands and the oriental
bias to 2008 becomes even more pronounced.
The UK has made it clear
that Beijing's investment, which could reach as much as
£45bn, is welcome and it follows the recent acquisition
by Chinese banks of stakes in such blue chip stocks as
Barclays and the US private equity firm Blackstone, at a
cost of $3bn. The talk in the finance houses is that the
label "Made in China" will soon be replaced by one
reading "Owned by China". Takeover speculation has
provoked concern in some quarters at the wisdom of
selling large assets to organs of a democratically
unaccountable state where the financial sector remains
underdeveloped.
China's trade surplus
with the rest of the world will widen from £130bn in
2007 to £145bn this year as it tries to tame its
burgeoning economy amid pressure from Washington and
Brussels to narrow the trade gap and raise its
currency's value.
Stephen Perry, chairman
of the 48 Group Club, a Sino-British business network,
said: "China has become an international player much
more quickly than it would have wanted to do, in part to
meet its need for natural resources. But I don't think
China has any intention of taking on American power. The
West is important to China in this stage of its
development as it seeks inward investment. But that is
beginning to be much less important and it is looking
more to the development of a strong Asia, in which it is
one of the strongest players because of its enormous
consumer base."
But while some may
question Beijing's political motives, there is no doubt
that China has arrived as serious power-broker. Last
year, it surpassed America as the greatest driver of
global economic demand. It is also widely predicted to
overtake Germany as the world's third largest economy
this year.
While nearly all of its
success since Premier Deng Xiaoping began China's
economic transformation in 1978 has been driven by
producing goods for the outside world, the country has a
burgeoning urban middle-class whose insatiable appetite
for consumer durables is hoped to put the economy on a
more stable footing. One London-based luxury markets
analyst said: "The Chinese are waking up to quality
brands in a way that is quite exciting. There is a real
sense that what the West once kept to itself is now
available to them, or at least the urban few who can
afford it."
The arrival of
conspicuous consumption and entry of Shanghai's
sovereign funds into foreign investment markets, with
London soon expected to be followed by the US, is
symptomatic of a China increasingly willing to assert
itself as a political and cultural influence, according
to experts.
From global warming to
Darfur and North Korea, the views of Beijing and its
willingness to act have become prerequisites to any
solution to the world's most pressing problems.
The Chinese New Year on 7
February will herald the beginning of the largest-ever
festival of China's culture in Britain with an accent on
contemporary artists in fields from video art to neon
signs. But others warn 2008 has as much potential to be
a disaster as a triumph for Beijing's attempts to herald
its own arrival on the world stage. The Chinese capital
will host 31,000 journalists for the Olympics and any
sign of protest or an attempt to quell dissent with
violence would be catastrophic.
The drum beat of
protectionism is already sounding in America and will
only get louder in a presidential election year, putting
pressure on both Republican and Democratic candidates to
take a "strong" stance on China. In the meantime,
Beijing will have to grapple with issues from rising
inflation to Taiwan, which holds presidential elections
in March, to its status as the world's biggest emitter
of carbon dioxide and likely role as the largest
consumer of primary energy resources.
Dr Kerry Brown, associate
fellow of the Royal Institute of International Affairs,
said: "There are good reasons to feel pretty
uncomfortable about 2008 for China. The world will be
rightly watching China in August for the Olympics. But
it will only take one truncheon blow to turn it away
from a story about sport to one about repression."
