The combination of a huge population and an extremely high economic growth rate is providing the world with a completely new kind of experience: China is, quite literally, changing the world before our very eyes, taking it into completely uncharted territory. Such is the enormity of this shift and its impact on the world that one might talk of modern economic history being divided into BC and AC – Before China and After China – with 1978 being the great watershed. In this section I will concentrate on the economic implications of China ’s size.
When the United States began its take-off in 1870, its population was 40 million. By 1913 it had reached 98 million. Japan ’s population numbered 84 million at the start of its post-war growth in 1950 and 109 million by the end in 1973. In contrast, China ’s population was 963 million in 1978 when its take-off started in earnest: that is, twenty-four times that of the United States in 1870 and 11.5 times that of Japan in 1950. It is estimated that by the projected end of its take-off period in 2020, China ’s population will be at least 1.4 billion: that is, fourteen times that of the United States in 1913 and thirteen times that of Japan in 1973. If we broaden this picture, India had a population of 839 million in 1990 when it started its major take-off, nearly twenty-one times that of the United States in 1870 and ten times that of Japan in 1950. [558]
Total population is only one aspect of the effect of China ’s scale. The second is the size of its labour force. Although China ’s population presently accounts for 21 per cent of the world’s total, the proportion of the global labour force that it represents is, at 25 per cent, slightly higher. In 1978, when the great majority of its people worked on the land, China only had 118 million non-agricultural labourers. In 2002 that figure had already increased to 369 million, compared with a total of 455 million in the developed world. By 2020 it is estimated that there will be 533 million non-agricultural labourers in China, by which time it will exceed the equivalent figure for the whole of the developed world by no less than 100 million. In other words, China’s growth is leading to a huge increase in the number of people engaged in non-agricultural labour and, as a consequence, is providing a massive – and very rapid – addition to the world’s total non-agricultural labour force.
The third effect of China ’s rise concerns the impact of its economic scale on the rest of the world. China ’s average annual rate of growth of GDP since 1978 has been 9.4 per cent, over twice the US ’s growth rate of 3.94 per cent between 1870 and 1913. It is projected that the duration of their respective take-offs may be roughly similar: 43 years in the case of the US, 42 years for China, because, although the latter’s growth rate is much faster, its population is also far larger. When the US commenced its take-off in 1870, its GDP accounted for 8.8 per cent of the world’s total, rising to 18.9 per cent by 1913. In contrast, China ’s GDP represented 4.9 per cent of the world’s total in 1978, but is likely to rise to 18- 20 per cent by 2020. In both instances, their GDP growth has had a major impact on the expansion of global GDP. In the 1980s, for example, the United States made the biggest single contribution of any country, accounting for 21 per cent of the world’s total increase; in the 1990s, however, China, even at its present limited level of development, surpassed the US, which remained at 21 per cent, while China contributed 27.1 per cent to the growth of global GDP.
The fourth effect is the impact China will have on world trade. Before the Open Door policy, China was one of the world’s most closed economies. In 1970 its export trade made up only 0.7 per cent of the world’s total: at the end of the seventies, China ’s imports and exports together represented 12 per cent of its GDP, the lowest in the world. China ’s economic impact on the rest of the world was minimal for two reasons: firstly, the country was very poor, and secondly, it was very closed. But since 1978 China has rapidly become one of the world’s most open economies. Its average import tariff rate will decline from 23.7 per cent in 2001 to 5.7 per cent in 2011, with most of that fall having already taken place. [559] Although its trade dependency (the proportion of GDP accounted for by exports and imports) was less than 10 per cent in 1978, by 2004 it had risen to 70 per cent, much higher than that of other large countries. China has now overtaken the United States to become the second largest exporter in the world, while in 2004 it ranked as the world’s third largest importer, accounting for 5.9 per cent of the global total. By 2010 a developing country, in the shape of China, will for the first time become the world’s biggest trader.
