Why China will dominate Asia and the world

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: Indian growth of 5.8%. Consequently, China’s national income today is almost 2.2 times that of India’s. In 1990, China’s share of world GDP growth (measured in PPP terms) was under 10%. In 2003, it has increased to 32%. In other words, almost a third of global income growth that one witnessed in 2003 was accounted for by China. If that wasn’t a serious index of economic power, then nothing is.

The powers-that-be in China from Hu downwards realise that income inequalities have widened rapidly between the eastern and southern seaboard on the one hand and the interior. They also understand that the greatest economic, social and political challenge facing the country is to generate rapid employment growth, especially for the poorer western provinces. Unlike our politicians, however, the Chinese don’t believe in empty employment guarantee schemes. They realise that employment increases only with sustained economic growth — and are therefore putting all the infrastructure and incentives needed to attract the maximum possible private sector investment in the interior.

Consider just Three Gorges, the world’s largest hydroelectric project on the river Yangtze. When completed in 2009 at an estimated cost of around $25 billion, it will produce 10% of China’s electricity. But that’s not all. The country has embarked on a $60 billion project called “South Waters North” — which will use a system of dams, canals and pipelines to divert excess water from the flood-prone southern and south-eastern parts of China to the arid north and west. Chinese policymakers also realised long ago that high import tariffs are inimical to the growth of manufacturing and infrastructure. In 1992, China’s trade-weighted average customs duty was 41%. Today, it is under 6% which, according to The Economist, is the lowest average tariff rate among all developing countries. Most key infrastructure inputs are imported at zero duty. Unlike South Korea, Japan or India, China chose to grow manufacturing through joint ventures and foreign direct investments. Last year, the country attracted $54 billion of FDI. At a time when the Left and Indian capitalists are arguing in favour of retaining Press Note 18, it is worth noting that joint ventures with foreign companies are producing almost 30% of China’s industrial products. According to Fortune, the CEOs of more than 40 major multinationals have already visited China in 2004.