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The dragon is awake

ChinaEconomyFinanceEconomic PolicyProductivityCommunist Party of China

There is intense focus on Beijing this week, as the plenary meeting of the Communist Party of China's Central Committee, which includes President Xi Jinping and Premier Li Keqiang, concludes after a series of discussions on economic reforms designed to open up China to foreign investment and loosen state controls over the economy.

Many analysts believe the extent to which the ruling party tackles the thorny issues of corruption, income inequality and degradation of the environment, as well as implementing the policies to continue the high rates of economic growth, will make or break the party's control over society. Failure to address these matters, it is feared, may portend social unrest in the future and threaten, or at least slow down, China's goal to be a world economic and political power.

Napoleon Bonaparte once said of China, "Let her sleep, for when she wakes, she will shake the world." Perhaps never have such prophetic words come more to pass than with China's 21st century rise to take its place among the top global economies. Its people and its policies are shaping the world in ways few would have imagined a generation ago.

The first sound of the dragon's stirring can be traced to 1978, when the government instituted a series of major economic reforms that slowly relaxed state control of all productive assets. Shortly thereafter, Deng Xiaoping, the pragmatic and forward-thinking leader of the Communist Party of China, uttered the words that would awaken the dragon and not only shake but perhaps change the world forever: "It doesn't matter if a cat is black or white, so long as it catches mice."

Freeing the people and enterprises from much of the ideological burdens of Maoism and state control that prohibited market economic activity, Deng encouraged individuals and businesses to pursue financial gain. He went even so far as to proclaim "to get rich is glorious," and the data indicate many have taken his advice. China now has the second-largest number of millionaires in the world, and over a hundred belong to the exclusive billionaire club.

Statistically the rise of China has been nothing but spectacular. Averaging a growth rate of more than 7 percent for more than two decades, gross domestic product has doubled approximately every eight years, and it is predicted that China will emerge as the world's largest economy within a quarter century. Per capita income on a purchasing power parity basis is estimated to reach over $10,000 in the next few years, and all segments of the population — including the poor with low education in lagging inland rural areas — have experienced gains in average income. Nevertheless, income inequality in China has risen rapidly in the past decades across regions, between rural and urban sectors, and within provinces.

The extent to which this economic juggernaut has impacted the United States economy cannot be understated. A number of politicians and pundits fault China for most of America's economic ills, claiming the end result of the economic development is a zero-sum gain with China's growth coming at the expense of the United States.

Others, however, cite the benefits of open markets, including the successes of U.S. companies that rely on exports to newly opened Chinese markets and the lower prices of consumer goods in America due to imports from China. China also is the largest buyer of U.S. debt, owning close to $1.3 trillion in U.S. treasury securities, which has helped to keep interest rates low for U.S. government borrowing.

Once an impoverished, developing country, there is no doubt China has taken its place among the ranks of the powerful. Former President Hu Jintao puts a very positive spin on this development, asserting that a "more dynamic and open China will be in a better position to not only maintain steady and relatively fast economic growth at home, but also contribute to the global efforts to tackle the financial crisis and promote world peace and development."

How China will proceed in the future and the effect of its policies on both the United States and the world economy remains to be seen. Nevertheless, the dragon is awake and the world is shaken.

Dennis C McCornac is the Interim Director of Global Studies at Loyola University Maryland. His email is dcmccornac@loyola.edu. Anne Cullen is an Associate Dean at the American University in the Emirates with a specialty in Asian Politics. Her email is anne.cullen@aue.ae.

To respond to this commentary, send an email to talkback@baltimoresun.com.

Copyright © 2014, The Baltimore Sun
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