The Rise of the East

Japan’s reputation as a major economic power is long established – but now other Far Eastern countries are making the jump from “developing” to “developed”. In particular, the last two decades have seen China evolve from bystander to economic superpower and its growing economic influence has led some commentators to speculate about its longer-term position in the global pecking order. For now, the US remains the economic powerhouse of the world, but China is already viewed as a force to be reckoned with.

The rise of the middle class in China is significant, particularly at a time when the US, Europe and the UK are experiencing a consumer slowdown: demand from affluent consumers in developing nations could provide some support for companies whose established customer base is feeling the pinch. However, soaring food prices are having a negative effect on China’s people, many of whom have become accustomed to a relatively comfortable existence over the last few years. China’s agricultural capacity and processes have not kept pace with its urban and industrial expansion and, although incomes have grown significantly, food prices are now rising faster than wages.

Will China go unchallenged as a global economic force of the future? Perhaps not. For now, China remains the most populous country in the world with 1.3 billion people, closely followed by India, which has a population of 1.1 billion, and whose booming economy has also been the focus of much attention. Looking ahead, the government’s official “one-family, one child” policy is likely to mean that China’s population begins to plateau over the next few decades, while India’s population is expected to increase.

China’s development has influenced almost every area of the global economy. Strong demand from other nations for its cheaply manufactured products has helped the economy expand rapidly; however, this vibrant economic growth has had its downside, and the Chinese government has sought to cool down the country’s export-fuelled growth. Meanwhile, inflation continues to run at very high levels, stoked by surging food prices, and the country’s insatiable appetite for raw materials and oil, driven by the rapid development of its infrastructure and booming demand for its exports, has helped to stoke surging commodity prices. Ultimately, in common with the rest of Asia, China is unlikely to prove immune to the full effects of a US-led slowdown, and this could help to put a brake on China’s growth in the short term.

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