China expert believes developing economies will account for four-fifths of global wealth by mid-century

Eric Thun, an emerging leading Western expert on China, believes the potential scale of the shift of economic power from the West to the East is often underestimated. The 42-year-old lecturer in Chinese business studies at Oxford University's China Centre says developing emerging market economies will command 80 percent of global GDP by 2050, with the advanced industrial economies having to make do with the remaining 20 percent. "This is the complete reversal of the position in 2000. Countries like China and India are going to be a very large percentage of that global GDP," he says.

Eric Thun

The rising importance of China is reflected at Oxford itself with the establishment of a new China Centre, which draws on all the China expertise at the university across all faculties.

The center, launched in 2008, as yet does not have its own dedicated building. But it was recently announced that Hong Kong entrepreneur Dickson Poon had donated 10 million (12 million euros) for one to be built by 2012. The final cost will be twice that amount.

"I think it (the China Centre) is an indication of China's importance in the world and the aim is for Oxford to play a role in terms of understanding and interpreting what is happening in contemporary China both in the UK and in Europe," Thun says.

Thun was talking in the garden before the recent snow behind the modernist Said Business School at Oxford, itself the result of a benefaction by Syrian-born businessman Wafic Said.

One wonders whether the new China Centre building on the grounds of St Hugh's College will be quite such a controversial architectural statement and fit in better with Oxford's more ancient "dreaming spires".

Architectural arguments aside, Thun believes it will certainly play a fundamental role in Oxford life.

"I would say the mission of the China Centre is to expose anyone who comes to Oxford about what is happening in China today," he says.

Oxford and China are no strangers to each other. The first Chinese book arrived for the newly opened Bodleian Library there in 1604. The first Chinese scholar, Shen Fuzong, came to the university at the end of the 17th century to catalogue the university's Chinese documents.

There are now no fewer than 730 Chinese students at the university, the largest overseas group other than that from the United States, and there are also 140 Chinese academics working there. The Chancellor of Oxford is Lord Patten, the last British governor of Hong Kong and a frequent visitor to Beijing.

Thun, a quietly spoken American originally from Syracuse in upstate New York, says his role at the center is to relay an understanding of the emergence of China as a major economic power in the business world.

He says what is happening in China is already very different from the post-war development of Japan or South Korea.

"When Japan and South Korea developed very rapidly, the people became rich as well. China and India's per capital levels are going to remain relatively poor because these countries are so large."

Thun insists that this will present fundamental challenges for businesses and they will have to rework the way they operate in these markets in order to succeed.

"If you are a German engineer, you are always going to be thinking about how you can improve the performance and quality of say, for example, a car. That is what German engineering is all about," he says.

"In China, if you add those bells and whistles you are going to price yourself out of the market. The challenge will be to redesign the car so that you can produce a good enough quality level at a cost which will allow you to compete."

Thun read political science at Princeton University and became interested in China while doing his doctorate at Harvard.

"I was interested in development issues so China made sense," he says.

While doing his PhD, he spent a year in Taiwan learning Chinese.

"I spent a year doing nothing but language work. A lot of businessmen I meet who go to China take Chinese lessons just on the side. While I think that is great, I think with that approach you are going to find it very hard to get past taxicab level," he says.

Thun, who visits China three or four times a year, conducts his interviews while doing field research there in Chinese.

"Learning Chinese is an ongoing process. My writing is by far the weakest, although I can type Chinese on a computer," he says with one of the characteristic little chuckles which seem to pepper his thought processes.

Thun went on to be an assistant professor in the Woodrow Wilson School and Department of Politics at Princeton University before moving to Oxford in 2005, where he specializes in teaching Chinese business studies.

He says it is an important subject since so much about doing business in China can be counter intuitive to Western firms.

"People ask when is China going to become an innovative country but that completely misses the point. We think about innovation as being about higher levels of technology whereas innovation in China means delivering a product with dramatically lower cost structures," he says.

He says the Chinese economy has been held back from advancing because its huge population has always given it a surplus of cheap labor.

"If you look at the span of history, one of the problems that China historically has faced is an excess supply of labor so that it has never been pushed into innovation-based activities," he says.

He believes recent spiralling labor costs in places such as Guangdong province, China's manufacturing heartland in the south, might actually prove something of a catalyst.

"This kind of pressure can be a good thing, if it stimulates upgrading. But the trick is creating a balance between upgrading the value chain in the coastal areas and ensuring some of the more labor-intensive manufacturing goes to the interior," he says.

He says pushing manufacturing away from the coastal economic zones is an incremental process that will not happen overnight.

"If you go back to the 1980s, a lot of development in Shanghai quickly pushed out to neighboring Zhejiang province but it is an incremental process and will take a long time to lead into the deepest hinterland," he says.

Thun says there are still a number of barriers in the way of China becoming a more knowledge-based economy, including major legal reforms.

"The question is what sort of institutions you need to support that kind of economy. You would certainly need a legal structure which protects intellectual property rights and one that is going to be relatively fair and objective as an arbiter in disputes," he says.

He says many of his Chinese students at Oxford are certainly optimistic about their prospects back in China.

'The Chinese students are excellent. They are wonderful students. Many of them are going to be very accomplished. There has been a sea change of attitudes. Whereas in the past many of them might have wanted to stay in the West, most now want to go where the opportunities are and that is often China. It is very useful to us because we are building up alumni in the country," he says.