November 22, 2007 · Posted in: Cross Border

Dawn of the Chinese century?

WILL China become a new global power? Some think so, given the country’s burgeoning economy and its increasing international clout.

China has the world’s fourth largest economy, and is also the third largest trading country, according to Focus on the Global South‘s China Programme research associate Dorothy Guerrero.

China is responsible for five percent of the world’s gross domestic product (GDP). The country’s gross national product is the world’s second-largest, using the purchasing-power parity measure. China has also surpassed the United States as the world’s top investment destination. It is also the biggest consumer of four out of five top basic commodities.

“Analyzing the global political economy, it is getting more and more apparent and obvious that China is a new global power,” said Guerrero during a roundtable discussion.

View Guerrero’s slide presentation.

For the Philippines, China’s rising economy has generated billions of dollars in trade, investment, and development assistance. Yet loans and agreements between the Philippines and China such as the NBN-ZTE deal, the Cyber Education project, and the North Rail project have come under fire for being “grossly disadvantageous” to the Philippines, in addition to being tainted by allegations of bribery.

Akbayan party-list representative Risa Hontiveros-Baraquel said that aside from the ZTE deal, the Philippine government has entered into 31 other “questionable” agreements with China.

The agreements covered trade, cultural protection, mass transportation and customs cooperation, and include 19 agribusiness deals that Hontiveros-Baraquel says “are patently unconstitutional and inimical to Filipino interests.”

By the end of last year, China had invested $76 billion in 160 countries. It is the Philippines’s third largest trading partner, after Japan and the U.S., with an average annual growth rate of 41 percent. China is also our country’s third largest export partner. Chinese investments in the Philippines totaled $350 million from January to September 2006.

Agreements signed between the Philippines and China include a 2005 joint trade committee agreement to develop cooperation in mining and infrastructure, and a 2007 framework agreement on expanding and developing bilateral economic and trade cooperation.

However, most of the agreements that the Philippines signed with China last January “are very problematic and many social movements and NGOs are criticizing these agreements as very skewed, which is more in favor with China than the Philippines,” says Guerrero.

The Organization for Economic Cooperation and Development (OECD), meanwhile, notes that the 19 agricultural agreements reserve 1.24 million hectares of farmland for the Chinese. As China is not a member of the OECD, there is little information on its overseas development assistance, and its loans are hard to monitor.

The agreements have led to competition for scarce land resources. More than two million hectares of land covered by the agreement are estimated to be ancestral domains, while more than one million hectares have yet to be distributed to farmers. Seven million hectares of land targeted in the agreement are forests.

Guerrero expects the agreement to add further stress to forestry, as 16 million hectares of forest lands are necessary in order to ensure a healthful and balanced ecology. She also points out that food production would also be affected as farmers would not have a final say on what kind of crops were produced, as the agreement dictates the use of the lands covered.

Guerrero adds that one key factor in China’s foreign policy is its “going out” strategy, which consists of a double interrelated policy of “inviting in” — continuing to attract inflow of foreign direct investment, and “going out” — the extending or outflow of foreign direct investment.

Chinese clout is also increasingly being felt in trade with Latin America and numerous infrastructure investments in Africa.

“On one hand, China poses tremendous economic benefits, but (it) also poses a threat if it becomes more and more powerful as a result of its economic growth,” says Focus on the Global South’s Herbert Docena.

Docena says that the U.S. has grown wary of China. The latter is the second largest market of U.S. exports and a big source of cheap labor for American companies, but the U.S. fears that China will use this economic power to boost its strategic or military power.

China’s influence is already felt in international organizations such as the United Nations (UN), where it has successfully prevented Japan from gaining a permanent seat on the UN Security Council, and for Taiwan to be recognized as a state.

China’s growth also comes in an era where many predict that the U.S. will decline. “Just as the 20th century was called the new American century, then maybe this will be the Chinese century,” says Docena.

Others, however, are not so sure.

Guerrero says that the main questions for China’s new role in the global political economy is whether it will make developing countries more prosperous, and whether or not China offers an alternative development model.

So far, Chinese loans and agreements in the Philippines and other countries have been dogged by controversy. And while China has enjoyed spectacular growth, Guerrero notes that the gap between the rich and poor in the country are increasing. China’s demand for natural resources is also increasing the environmental problems of many developing countries.

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