What will become of China? Maybe the predictions aren’t always right
Sanne van Oosten
When will China overtake the US as largest economy in the world? OECD predicted that this will be by 2015, Goldman Sachs predictes 2025 and the World Bank predicted 2030. New research suggests it will rather be sooner than later. However, these reports often don’t include many social and political factors, which are hard to predict. China will face many challenges the upcoming years.
It is true, China’s modernization is the fastest modernization process ever witnessed in history. It is remarkable how China has transformed from a poor peasant country to the modern country it is today, with the most modern cities in the world. For example, in 1980 only 1.3 percent of the world’s population had a lower per capita GDP adjusted by purchasing power parity (PPP) than the population of China. By 2010 only 31.5 percent of the world’s population lived in countries with a higher average GDP per capita measured by PPP than China. The Chinese GDP increased more than fourteen fold since the economic reforms started in 1978.
Still, it is hard to keep growing like this. One effect of this huge economic growth is that there is a housing bubble pumped up and ready to burst. The prices for real estate have gone up so fast, that everybody wants to invest in this sector. The result is a huge oversupply of houses. It is matter of time that the oversupply in houses will lead to a downfall in real estate prices. When the real estate market, one of the motors of the Chinese economy, collapses, it will be a huge blow for the Chinese economy and those many people who invested their money in it.
At the moment there is another problem arising, namely the Chinese territorial expansion at sea. The Chinese government is claiming to be the rightful owner of many uninhabited islands. This way they are claiming lots of sea as their territory, resulting in many disputes with other countries in the region. But not only the region is involved. The United Stated announced a few months ago an increase in the military based in the Philippines, a country with lots of different disputes with China. What the consequences of the Chinese expansion would be depends on China, the region and the international community. It can go into any which direction.
But maybe more relevant are the internal social matters. The consequence of the Chinese one child policy is that there are more boys than girls born the last decades. For example, for every 118 boys born were a hundred girls born in 2010. The consequences of those unique demographics should not be underestimated (sociologists stress that a great deal of the Arab spring was not about democracy, but many unmarried and unsatisfied young men). This imbalance can cause huge social trouble when many men cannot get married.
Furthermore, a result of the one child policy is the aging population. In the future China cannot rely on the great supply of cheap workers any more, one of the greatest forces of the current economic growth. Furthermore, what to do with the huge part of society that is old and needs lots of care?
The one child policy has another effect: many children are ridiculously spoiled. The single child gets all the attention from their parents and grandparents. We heard teachers complaining that all their students are acting like little emperors. It would be interesting to see what will become of a spoiled generation.
At last, but definitely not least, there is the great inequality. By fully embracing a market economy many people are left out. A form of die-hard economic capitalism is created with minimum social security. As a result China became from one of the most egalitarian countries in the world to one of the most unequal. It has been estimated that the richest one percent households control around 41 percent of the countries privately owned wealth. A leading Chinese economist, Yu Yongding, argued: “With the contrast of the opulent lifestyles of the rich and the slow improvement of basic living conditions for the poor fomenting social tension, a serious backlash is brewing.” Will the social tension lead to a second Tiananmen Square protest and how will the authorities react then?
Of course, those many predictions predicting that China will have the biggest economy are not based on thin air. I see the many signs that China is going that direction as well and I do share the opinion that once China will be the economic world power. Still, the modernization process went so fast that a relapse will not be unlikely before China will reach its economic supremacy. Many unpredictable factors will play an important role in China’s future.