CHINA MARCHES
The Wisdom Fund
presented by
Mohsin Ali O.B.E.
to the
THE COLLEGE CLUB
North Carolina
June 6, 2006
Thank you for your kind words. Praise from Caesar is
praise indeed. I am also flattered by the presence here
of so many of your esteemed colleagues.
I am often asked in TV interviews and at lectures why
we Americans should be interested in what happens in
far away places to strange people we know not. In our
rapidly shrinking high tech1 world, events abroad
instantly impact on us. Politics and economics are no
longer only local because we now have a globalized
economy and high speed communications.
We can no longer have students thinking that the late
Sir Peter Ustinov succeeded Stalin in the Kremlin; or
even a great Italian tenor saying 3I have not heard the
lady sing2, when asked what he thought of Babe Ruth.
And, Ustinov famously said, 3TERRORISM IS THE WAR OF
THE POOR, AND WAR IS THE TERRORISM OF THE RICH.2
I have been asked to speak about the March of China --
the unprecedented rise of this most populous nation of
1.3 billion as a big economic and strategic power.
Some 200 years ago Napoleon Bonaparte warned: 3China is
a sleeping giant. Let it sleep, for when it awakes it
will shake the world.2
Well, the giant has woken up.
The father of modern China, the great helmsman and
strategist of the Red Army1s fabled Long March, Mao
Tse-Tung famously said in 1946: 2The atomic bomb is a
paper tiger which the reactionaries use to scare
people. It looks terrible but in fact it isn1t. All
reactionaries are paper tigers.2 Earlier in 1938, just
before the outbreak of World War II in September, 1939,
he declared: 3...Political power grows out of the
barrel of a gun.2 Much later in 1956, after Communist
China had come to stay, he mellowed and said: "Letting
a hundred flowers blossom and a hundred schools of
thought contend is the policy2 of his Communist party.
However, Chairman Mao was also witty. He would tell
visitors: 3Our fathers were indeed wise. They invented
gunpowder but used it only for fireworks. Finally, they
invented the compass, but took care not to use it to
discover America.2
On the other end of the spectrum here are some
brilliant Churchillian epigrams:
Perhaps it is better to be irresponsible and right than
responsible and wrong.
Where there is a great deal of free speech there is
always a certain amount of foolish speech.
No one pretends that democracy is perfect or all wise.
Indeed, it has been said that democracy is the worst
form of Government except all those other forms that
have been tried from time to time.
I would rather be right than consistent.
When his friend Lady Astor (an American) snapped at an
unsober Churchill: 3Winston, if I were your wife, I
would put poison in your coffee,2 Churchill retorted:2
Nancy if I were your husband I1d drink it.2
A long time favorite of mine is: When an aide
returned one of Churchill1s memo1s with a note
correcting a sentence that he had ended with a
preposition, Churchill retorted: "This is the sort of
pedantic nonsense up with which I will not put.2
But as a pragmatist he would have put up with China1s
new peaceful and diplomatic long march in this
post-Cold War age of high tech, mass communications,
economic, trading and fiscal globalization.
Having readily accepted a speaking time limit of 30
minutes I worried about how I could in this brief and
arbitrary division of infinity deal with the great
civilizations of China, which started building the
Great Wall in 250 BC, was ruled by Kubla Khan in the
13th Century and visited then by Marco Polo.
The answer is to be an escape artist and with current
high technology flash back and later fast, fast, fast
forward into 2006. In going back to the future what we
find is that what goes around comes around. China has
seen all this before.
A remarkable book 3The Eastern Origins of Western
Civilization2 just published by English professor John
Hobson startlingly contends that it were China, India
and the middle east Arab Muslims that fathered
globalization during the 500 to 1800 AD period. This,
he claimed, enabled the rise of the West.
Now let us fast forward. About 2,256 years after the
building of the Great Wall, China last month announced
the completion of its main construction of the biggest
damn in the world, the Three Gorges hydroelectric
project on the legendary Yangtze river.
American experts forecast that over the next 25 years
nearly $10 trillion -- more than 60% of all the money
invested in the future of energy -- will pour into the
electricity sector, specially in China, India and the
U.S. the U.S.
China has just completed the main construction of its
famous Three Gorges hydroelectric dam, the largest ever
built in the world.
For electricity the big money will be in coal, nuclear
power and natural gas. The Japan Times said that the
massive power that world industry and 21st century life
need 3will have to come increasingly from safe nuclear
energy.2
China is on the biggest power-plant building spree the
world has ever seen. Spending in 2004 on generators
almost doubled to 200 billion yuan. So many new
hydroelectric damns, coal-fired generators and nuclear
facilities are being built, the equivalent of Britain1s
entire electricity output is being added to the
capacity of the country1s national grid every two
years, London1s newspaper The Guardian reported.
With these new engineering wonders, the People1s
Republic of China has embraced the modern world as
never before. Is that cause for celebration or anxiety?
On this small green planet, the stakes are huge. The U
S and China are intimately linked -- for better or
worse. Can we make room for each other?
Washington1s relations with communist Beijing are
better than they have ever been. So, why is China
engaged in a major military buildup?
And, why is there so much anti-China propaganda done in
influential political and media circles in our country.
Firstly, let us glimpse at the China of today:
China recently celebrated a successful predawn landing
of its second manned space flight. Its first human
space flight was two years ago. A moon probe and a
small space station by 2010 is China1s stated goal.
China1s economy became the sixth largest in the world
when its 2004 Gross Domestic Product (GDP) hit the $2
trillion dollars mark. Even after two decades of strong
growth, China is still the world1s fastest-growing
major economy.
The sleeping dragon has woken up with a voracious
appetite for the world1s oil, energy resources and
minerals.
The Organization for Economic Cooperation and
Development (OECD) recently reported that China1s
economy would leapfrog that of Britain, France and
Italy within five years to become the third largest in
the world after the U S and Japan.
And, China is set to surpass even the US as the biggest
exporter by the end of the decade, said the Paris based
OECD of 30 rich industrial nations. However, the U S
economy is still far ahead with a value of $11.7
trillion in 2004.
The OECD, in its first major assessment of China,
already the seventh largest economy, praised Beijing
for its bold economic reforms which had allowed the
emergence of a powerful private sector. It expected
China to maintain its rapid 9.5 percent growth of the
past two decades for some time.
The report, in making several business and monetary
recommendations, called for better enforcement by China
of company bankruptcy, intellectual property rights and
anti-pollution laws.
China1s total trade in 2005 reached $1.4 trillion, up
23% from the year before and is expected to rise 15% in
this year. The country1s trade surplus for 2005 hit
about $70 billion.
Chinese per capita GDP in 2004 was $5,000. Its 2002
budget was about $300 billion.
China1s foreign exchange reserves jumped $50 billion in
the fourth quarter of 2005 to a record $818 billion.
This takes China close to Japan, the world1s largest
holder of foreign exchange.
American critics say that the Chinese currency is
undervalued by as much as 40 percent, pushing exports
higher and contributing to a bilateral trade imbalance
that shot up to about $200 billion in 2005.
Consumer price was at the low level of 1.2 percent.
Yuan Renminbi (RMB) exchange rate was 8.27 to US $1.
On July 21, 2005 the People1s Bank of China announced a
managed floating exchange rate based on market supply
and demand with reference to a basket of currencies.
The peg to the U S Dollar was removed, making the Yuan
more flexible. It was revalued by 2.1 percent and has
only gained 0.3 percent in value since then.
Trade between China and Latin-America has quintupled
since 1999, reaching almost $40 billion by the end of
2004.
Here are some random snapshots of China1s new economic
heights:
There are 1.3 million cars in Beijing, up 140 percent
since 1997.
Retail sales in 2004 were 600 billion; 25 million owned
cars. Aircraft departures in 2005 were about one
million. Half the world1s production of concrete and
one third of its steel output is being consumed in
China1s fantastic building boom.
China1s defense budget in 2002 was about $268 billion,
compared to the over $300 billion of the US. Chinese
active troops strength is about two and a quarter
million.
On the export-import front, in 2003 Chinese total
imports were about $350 billion (9 percent from the US)
while exports were some $440 billion (22 percent to the
US.) China1s total exports in 2004 amounted to over 500
billion dollars.
Agricultural products exported in 2003 totaled 30
billion dollars and imported 23 billion dollars.
Two-thirds of counterfeit goods seized at US borders
come from China.
Direct foreign investment in China in 2004 was 60
billion dollars.
China has more than four times the almost 300 million
population of the U S , nearly all of it concentrated
in the eastern half of the country.
About 11 million people live in the Chinese capital.
The wealth so evident in cities like Shanghai, with a
population of about 13 million, remains out of reach
for most of China1s population of 1.3 billion.
Shanghai1s skyline shows over 300 skyscrapers compared
to only one in 1985.
China is an economic powerhouse that is growing,
competing for world natural resources and bursting with
consumers. Please note this startling projection:
Lester Brown, the eminent American environmentalist,
has recently projected that in 2031 China would need 99
million barrels of oil daily.
The whole world oil consumption, including that of the
U S, today is 84 million barrels of oil per day.
China1s oil production in 2005 was three million
barrels a day but its oil consumption is twice as much.
At present China1s crude oil reserves amount to 18
billion barrels.
A huge need for resources is now driving China1s
foreign and trade policy. For example, China has
recently won access to key world resources -- from gold
in Bolivia and coal in the Philippines to oil in
Ecuador and natural gas in Australia. China ranks
number 1 in world consumption of copper, zinc, rubber,
cotton, wheat, rice, tin, raw wool and major oil seeds.
It consumes 35 percent of the world1s total coal, 26
percent of steel and 8 percent of oil.
More than 45% of China1s crude oil imports come from
the Middle East; 29% from Africa; 14% from Europe and
11.5% from the Asia-Pacific region.
Iran already accounts for about 12% of China1s oil
imports and in October last state-controlled Sinopec,
one of China1s three major oil companies, signed an oil
and natural gas agreement with Tehran that could be
worth as much as $70 billion. Beijing agreed to develop
the giant Yadavaran oil field and buy 230 million tons
of liquefied natural gas over the next 30 years.
Teheran committed itself to exporting to China 150,00
barrels of oil per day, at market prices, for 25 years.
However, Beijing has set out to replace some of its oil
consumption with alternative forms of energy, such as
coal, of which it holds the world1s third largest
reserves. China is also projected to become our
planet1s largest producer of nuclear energy by 2050.
Meantime, over 700 Chinese companies are operating in
49 African countries.
Only earlier this month China1s top offshore oil
producer CNOOC agreed to pay $2.3 billion for a stake
in a Nigerian oil and gas field, its largest overseas
acquisition. Sudan exports more than half its oil to
China, supplying five percent of oil needs. Angola and
Congo are other oil exporters to China, which is
prospecting in Mali, Mauritania, Niger and Chad.
The World Bank calls China home to 16 of the 20 most
polluted cities on earth, thus making the country1s
blighted environment a cautionary corollary to its
phenomenal economic success. Environmental degradation
robs the nation of up to 12 percent of its GDP
according to the World Bank and each year 300,000
Chinese die prematurely of respiratory ailments.
Although the US still produces far more greenhouse
gases, particularly in per capita terms, China is the
world1s second largest polluter. In the next 10 years
the problem will become even more serious.
Most of the year, the air in Beijing hangs as thick as
egg-drop soup. Even the billboards promoting a ‘green
Olympics1 in 2008 are covered in grime.
Now the following statistics will give you an idea of
life and taste styles in the world1s most populous
country:
Life expectancy is 70 years for male and 72.7 for
female.
Aids rate is 0.1 percent.
Births per thousand are 13, deaths 6.9.
There are some 350 million smokers in China.
The estimated rural Chinese who have never brushed
their teeth, western style, is 500 million.
About 20 percent of the world1s total ice cream is
consumed in China.
China, with one fifth of the world1s population, has a
literacy rate of 85 percent.
The percentage of urban Chinese with a college
education is 5.6, rural 0.2.
Now let us examine related political and social
developments in China.
Three million US manufacturing jobs have been lost in
the past five years and six million more could be lost
in the coming 10 years. The US merchandise trade
deficit with China has been growing 20 percent a year
and could surpass a trillion dollars by 2015.
Thus China stands to trounce Detroit in autos and
Silicon Valley in info1 tech, while India captures
software and high finance.
This would leave the US to export raw materials,
colony-style.
China and India are certainly on the rise. Whether the
US can match Asia1s new dynamism is in America1s own
hands. But the US can still thrive if it invests in new
innovative industries to stay ahead of the growing
competition from China and India.
By focusing on innovation rather than brawn, and
ensuring that labor and regulatory conditions are
attractive, the US could continue to attract and retain
the best and brightest.
All over China, peasants are speaking out on grassroots
concerns and building a new civil society. Almost
anything goes these days but you still cannot oppose
the Communist party.
Will China ever really be a ‘free democracy1 like the
US?
In the domestic political sphere, official statistics
showed that last year almost 180,000 communist party
officials were disciplined for corruption.
Sixty-three percent of Chinese polled had a positive
view of U S-Chinese relations.
So please let me note the complex Washington-Beijing
relationship in this way:
China is the second biggest investor in US Treasury
bonds after Japan. At the end of June 2005 China held
US funds of $243 billion, up from $165 billion in 2004.
Japan held $680 billion at the end of last June.
China has become a leading exporter of information
technology and is now training 300,000 engineers
compared to 60,000 in the U S. Giants like Microsoft
have pleaded with Congress to give special visas to
thousands of Indian and other foreign computer
scientists and programmers to come and work in their
Silicon Valley and other American research industries.
Meantime, India, about to reach one billion people, is
already on the cutting edge of the computer world.
Thus China and India create immense opportunities, but
these also bring new risks. If China stumbles, or if it
decides to buy fewer American T-bonds, pushing up
yields, then America might really have something to
complain about -- the first global downturn made in
China.
Washington is faced with a very complex and sensitive
problem in dealing with China's emergence as a world
power. Firstly, there is the explosive issue of Taiwan.
I have contended for decades that Beijing will never
give up its fundamental and principled position that
Taiwan is a part of the mainland and belongs to China.
Little known in America is the 1943 Cairo summit
declaration. In this, President Franklin Roosevelt,
British Prime Minister Winston Churchill and the then
Chinese nationalist leader Generalissimo Chiang
Kai-shek solemnly pledged that following the
unconditional surrender of Japan in World War II,
Formosa (now known as Taiwan and then occupied by
Japan) would return to China.
In fact, successive US Presidents have accepted a
one-China policy, that there is only one China and not
two -- China and Taiwan, where Chiang Kai-shek1s
forces, defeated in the civil war with the communists,
fled to in December 1949 and were protected by the US.
The US Administration and Congress have firmly insisted
that the Taiwan conflict must be solved only by
peaceful means.
Today about 700 Chinese ballistic missiles are reported
to be pointed at Taiwan, which the U S is pledged to
defend against any external attack.
If the ‘Republic of China1 government in Taipei moves
Taiwan (with a population of 23 million and per capita
GDP of $24,000) towards independence, which I am
confident the US will not allow, then all bets for a
peaceful solution are off.
(Here is a frightening Asian aside: published American
studies estimate that a nuclear exchange between India
and Pakistan would initially kill two million people,
cause 100 million casualties and, with radioactive fall
out, contaminate south and central Asia, as well as
much of the globe.)
Bowing to the inevitable, Britain returned its crown
colony of Hong Kong to China in July 1997 while
Portugal gave back Macao to Beijing in December 1999.
The vital long-term US relationship with Japan too has
inevitably become an urgent issue. Who will eventually
be Washington1s favored Asian partner -- Japan, India
or China. Anyhow, I think there is NO alternative to
having a good cooperative relationship with Beijing.
There is too much at stake for China to be regarded as
a rival. The rise of China is ineluctable; the US has
no option but to live with an emerging super economic
power and make the best of it.
However, I must recall this famous caution sounded by
the late British Labour Prime Minister Harold Wilson,
3a week in politics is a long time.2 It is even longer
in our high tech1 global economy.
China is making amazing progress not only in
information technology but also in general economic
progress which is highlighted by the rise of the Yuan
in international markets. It reached a record high of
over eight to the US dollar on January 8.
In a famous speech on September 21,1949 the victorious
civll war communist leader Mao Tse Tung declared: "The
Chinese people have stood up. An upsurge in economic
construction is bound to be followed by an upsurge of
construction in the cultural sphere....Our national
defense will be consolidated and no imperialists will
ever again be allowed to invade our land. Our people's
armed forces must be maintained and developed with the
heroic and steeled People's Liberation Army as the
foundation. We will have not only a powerful army but
also a powerful air force and a powerful navy. Let the
domestic and foreign reactionaries tremble before
us...2
Now some 60 years after Mao1s Red Army1s famous long
march in which it fought the Japanese and later
defeated Chiang kai-shek1s nationalist forces, China is
in the middle of a different revolution, a digital
kind.
The country has become the world1s largest producer of
mobile phones, PCs and cameras, which it can turn out
in millions. On size alone, it is fast become a
technology superpower. Even though only eight percent
of its people have access to the Internet, this equates
to 100 million people online, second only to the US.
About 70 to 80 percent of Internet users use broadband
-- it only costs about !0 to 15 dollars a month for
unlimited Internet access.
No longer just a tech producer, China is becoming a
gargantuan tech consumer.
China is now the world1s largest cell phone market,
with more than 380 million mobiles.
On the dawn of this new year Chinese PC manufacturer
Lenovo did the unthinkable -- it bought part of IBM,
the part that makes PCs.
Thus it shot up from 9th largest to the 3rd largest PC
manufacturer in the world and became a real
international company.
I have earlier mentioned my belief (not very original)
that the rise of China is ineluctable. Its achievements
in world trade and resources of labor guarantee it.
Only domestic political troubles could hinder progress.
That is why we can expect the Chinese Communist Party
to continue its controls on all aspects of life,
particularly including information. The Chinese
leadership does not believe that China can yet afford
the luxury of democracy with all it distractions from
the main tasks which were so clearly defined by Mao in
1949.
Now in this new century, what should our country, the
lone superpower, do? It would clearly be grossly
presumptuous to prescribe any single action in so
complex a situation. But perhaps a really hard look at
the world and America1s role in it could be a good
first step.
Several questions need to be asked and a few realities
like the following must be accepted:
== Great military power does not necessarily bring
domestic security in the age of terrorism.
== Foreign military actions need to be assessed
ruthlessly in terms of national cost/benefit.
== Should progress of the world economy depend on the
profligacy of the American consumer?
== Is American foreign policy excessively influenced by
domestic and often sectional political considerations?
== Should Asian countries, mainly China and Japan, in
effect hold a mortgage on the American housing market
through their huge holding of American bonds and
securities?
With this in mind let1s ask ourselves -- can the great
economies of the world dovetail more closely so that
they work together rather than compete, particularly in
the coming era of scarce energy resources?
China is absolutely determined to end the poverty of
millions within its own borders. Can the world work
together to end the poverty of millions everywhere?
Yet another Chinese civilization is rising through a
modern economic miracle.
The Chinese dragon, still politically communist, is
being steadily transformed from a command-control
economy to free enterprise capitalism. Already, it is
about 70% privatized and Chinese multimillionaires are
on the rise.
Thus, the Washington-Beijing relationship (bilaterally
and through the United Nations and the World Trade
Organization) is absolutely key to a whole range of
politico-economic-social and strategic issues and
global prosperity. On it will depend future world
peace.
Here is a sting in the Chinese dragon1s tail for you:
The CHINA ECONOMIC WEEKLY has reported that there are
300,000 millionaires in China (in one million yuan
Chinese currency). In the next 10 years, China could
produce 20,000,000 millionaires. Most of the
millionaires are in Beijing, Shanghai and Guangzhou.
Foreign banks have targeted China1s new millionaires to
provide them with special financial and related
services.
China started the process of privatization of its
state-owned enterprises in late 1990s, and this process
has gone very fast. Its state-owned enterprises dropped
to 150,000 in 2002 from 260,000 in 1997.
I have tried to sum up the whole gamut of the
Beijing-Washington relationship in half an hour; how
foolish can i be. But, as King James 1st, the wisest
fool in Christendom said, Time, time, is an arbitrary
division of infinity; it certainly is in the long
history of China.
Now, surely the time has come for the U S and China,
the established global superpower and the emerging
economic superpower, to put their relations on a basis
of mutual confidence and even genuine friendship! For
there can be no doubt about how much the two countries
could achieve in securing world peace and helping the
developing world if they worked in trade and amicable
partnership.
It is 34 years since President Richard Nixon visited
Beijing on what became known as the ‘opening to China.1
Since then China has begun to consume more wheat and
rice and nearly twice as much meat as the U.s. China
now uses twice as much steel and 300 million more tons
of coal per year and much more aluminum, cooper and
fertilizers than the U.S.
President Nixon In an emotional toast at an official
banquet then called on the U S and China to ‘rise to
the heights of greatness which can build a new and
better world.2
The world faces grave problems enough, from the
quagmire in which US troops are involved in Iraq to
fears about the nuclear ambitions of Iran and North
Korea, the Israeli-Palestine conflict and the stalled
world trade negotiations.
So, will this be the new century of Sino-American
rapprochement and friendship ensuring world prosperity
and peace?
Albert Einstein wrote in 1946:
3THE UNLEASHED POWER OF THE ATOM HAS CHANGED EVERYTHING
SAVE OUR MODES OF THINKING, AND WE THUS DRIFT TOWARD
UNPARALLELED CATASTROPHE.2
Can our leaders change their thinking and policies and
save our little green planet earth from dying of oil
thirst and exploding in big nuclear bangs?
I thank you for listening to such complex and tough
issues so patiently.
God keep you safe and bless our generous land.
Finally, please enjoy this favorite Coleridge verse of
mine:
IN XANADU DID KUBLA KHAN
A STATELY PLEASURE-DOME DECREE:
WHERE ALPH, THE SACRED RIVER, RAN
THROUGH CAVERNS MEASURELESS TO MAN
DOWN TO A SUNLESS SEA...2