By Mure Dickie
Financial Times, 29 December 2005
The pre-Christmas news that China's economy was 17 per cent bigger than previously reported had resonance far beyond its statistical significance. With China now officially the world's sixth largest economy and catching up fast with France and the UK for fifth and fourth place, the message was clear: the integration of the most populous nation into the global economic system is no longer a theoretical issue but a reality with immediate implications.
Already in 2005, the impact of that integration had been felt more widely than ever before.
European and US failure to prepare for an end to textile quotas left policymakers scrambling to respond to a flood of cheap Chinese clothes. The European Union impounded 77m sweaters, trousers and bras at its borders, and Beijing was forced into months of tetchy talks with Washington and Brussels before accepting temporary restrictions on the textile flow.
Such talks were complicated by the view of many in the US that China was using an artificially cheap renminbi to support its soaring bilateral trade surplus. Beijing won only temporary respite from its critics with a 2.1 per cent revaluation against the US dollar in July - and further disappointed them by keeping the currency on a tight leash thereafter.
In turn, vocal opponents in the US Congress were able to help to sink an unprecedented Dollars 18bn (Euros 15bn, Pounds 10.3bn) bid for the US energy group Unocal by the Chinese state-controlled oil major CNOOC.
Still, the bid was both a signal of China's determination to win access to the energy it needs to fuel its development and a harbinger of offshore investment to come. Beijing's "Go Global" policy already has a poster-child. With the completion in May of Lenovo's Dollars 1.75bn acquisition of IBM's personal computer unit, the Chinese company became the world's third largest PC producer and its first truly global electronics brand.
At home angry anti-Japan demonstrations in Chinese cities were a reminder of regional tensions. China's decision to enshrine in law its threat of force against rival Taiwan helped to kill EU moves towards ending its arms embargo. The year saw no resolution of questions about the ways in which China's rise will affect the world. But it left few in any doubt that its effects will be far-reaching.
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Citation: Mure Dickie. "Rise of Asian powerhouse challenges economic order," Financial Times, 29 December 2005.
Original URL: http://taiwansecurity.org/News/2005/FT-291205.htm
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