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2008: The year a new superpower is born
By Cahal Milmo
01/02/08 "The
Independent" -- - 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."
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