Each of these scale effects – population, labour, economy and trade – clearly has a mainly positive impact on the rest of the world, stimulating overall global growth and the expansion of national economies. But the fifth effect, China’s consumption of resources, has a largely negative global impact: because the country is so poorly endowed with natural resources, its population so enormous and its economic development so intensive, its demand for natural resources has the double effect of raising the price of raw materials and depleting the world’s stock of them, a process that, on the basis of recent trends, is likely to accelerate in the future.
Although China remains a poor country, its per capita GDP only reaching $1,000 in 2003, it is already having a profound impact on the world. Along with the United States it has been the main engine of global economic growth, contributing no less than one-third of the world’s growth in real output between 2002 and 2005. It has been widely credited with having pulled Japan out of its long-running post-bubble recession, having been responsible for two-thirds of the growth in Japan ’s exports and one-quarter of its real GDP growth in 2003 alone. [560] The emergence of China as the world’s cheapest producer of manufactured goods has resulted in a sharp global drop in their prices. The price of clothing and shoes in the US, for example, has fallen by 30 per cent over the last decade. Major gainers from this have been consumers in the developed world, while the rise in commodity prices consequent upon Chinese demand had a beneficial effect on primary producers – many of which are based in the developing world – until the global downturn intervened. Anxious to secure sufficient supplies of raw materials to fuel its booming economy, China has been highly active in Africa, Latin America and the Middle East, concluding major agreements with Iran, Venezuela and the Sudan amongst many others. Another net gainer has been Russia, which is a major producer of many commodities, notably oil and gas; and, though rather less trumpeted, Australia. It is China ’s shortage of raw materials that has driven a major diplomatic offensive with many African and Latin American countries, including the ambitious China- Africa summit in Beijing in November 2006. [561] The main losers have been those developing countries, like Mexico, whose comparative advantage lies in similar labour-intensive production and that find themselves in direct competition with China. [562] They have also lost out to China in terms of foreign direct investment, with many international firms relocating their operations from these countries to China. The other obvious losers are blue-collar workers in the developed world who have found their jobs being outsourced to China.
By far the greatest impact of China ’s rise has been felt in East Asia. The main gainers have been the developed Asian tigers of North-East Asia – South Korea and Taiwan, together with Japan. They have been the beneficiaries of cheap manufactured goods produced in China while at the same time enjoying growing demand from China for their knowledge and capital-intensive products. [563] Their own companies have relocated many of their operations to China to take advantage of much cheaper labour, as in the case of the Taiwanese computer industry. [564] The losers have been the same as those in the West, namely those workers displaced by operations outsourced to China. Unlike the United States, which has a huge trade deficit with China, all of these countries enjoy large surpluses with China. The nearest example in the region to a grey area is South-East Asia, whose economies are not so dissimilar to that of China, though Singapore and Malaysia, in particular, are rather more developed. Over the last decade, the ASEAN countries have seen a large slice of the foreign direct investment they previously received going to China. They have also lost out to China in the mass assembly of electronic and computer equipment – Singapore and Malaysia being notable examples – and have, as a consequence, been forced to move up the value chain in to order to escape Chinese competition. [565] The country that has suffered the greatest is Indonesia, whose economy most closely resembles that of China. Indonesia has lost out to China in terms of direct investment by foreign multinationals, which have opted for China rather than Indonesia as their preferred production base. On balance, however, China’s growth has greatly benefited the ASEAN countries too, with China now comfortably ensconced as their largest trading partner, one of their biggest markets (if not the biggest), and in many cases their main provider of inward investment. [566]
