Deng Yuwen

Set house in order before going out

Japan recently announced that its nominal GDP for last year was $5.47 trillion, making China, whose economy was worth about $5.8 trillion in 2010, the world's second largest economy. This official change in ranking is not news, because China's economy had already surpassed Japan's in the second quarter of 2010.

Not every Chinese is overjoyed with the country's rise in global economic ranking. Many even take the rise for granted because, compared to Japan, China has a vast territory with rich resources and the world's largest population. More importantly, even though China has surpassed Japan in terms of GDP after more than 30 years of reform and opening-up, it remains a developing country with about 150 million people struggling with poverty.

To become the world's second largest economy, China has paid a high price, including severe pollution, environmental damage and widening wealth gap between the rich and the poor, something that the GDP figures do not show. Moreover, GDP data fail to indicate factors such as economic benefit and actual national wealth. Nor do they indicate social justice, happiness and other important factors.

Yet, despite the defects of GDP, we should see China's rise in global economic ranking as a remarkable achievement. After becoming the world's second largest economy, China perhaps has more resources and means to fulfill its national goals, pursue its interests and uphold international justice.

The GDP figures do not indicate some more facts such as China is the world's largest trading country, biggest creditor nation and the largest market for staple goods. This means any change in its decision on procurement and issuing of loans can affect the global market.

Shifting our attention from the bright to the not-so-bright side, we see that gaps in some fields refuse to be narrowed, let alone bridged. China's per capita GDP is only one-tenth of Japan's. It still lags behind Japan in education level, quality of workforce and average life expectancy. And none of the Chinese enterprises have become globally influential like their Japanese counterparts such as Sony and Toyota.

If China fails to eliminate the threat posed to its sustained economic growth by structural imbalance and unfair distribution of wealth, it runs the risk of being overtaken by Japan, which had its feet firmly entrenched on the second spot for more than four decades.

Japan had already been the world's second largest economy for a decade when China introduced reform and opening-up. At the turn of the century, the size of China's economy was only one-fourth of Japan's, and international experts had forecast that it would take another 25 years for China to catch up with Japan in economic strength. But China proved the pundits wrong and overtook Japan in only 10 years.

In retrospect, it is extremely difficult for a developing country/region to elbow itself into the ranks of advanced countries/regions. The International Monetary Fund once enlisted 33 countries/regions as advanced economies, among which only four economies, all non-European, were poor before World War II, namely Singapore, the Republic of Korea, Taiwan and Hong Kong.

Surely, China's is a huge economy, but it is far from being a top-notch player. China's per capita GDP is about $4,000, which means it ranks after more than 100 countries. It may be the world's largest trading country, but processing trade accounts for half of its total trade volume. Besides, its exports are mainly low-end products, which yield low profit but wear out its labor force and denude its resources.

Known as the "world's factory", China is not yet self-sufficient in technology, particularly in high-tech. Domestic enterprises with self-owned brands take up less than 20 percent of its export sector. Worse, China now faces many trade frictions, which have been arising with alarming frequency and intensity.

Above all, it faces the challenge of improving its people's livelihood and recovering from the setbacks it suffered while adjusting its industrial structure.

At least for the time being, the task of reforming the international system is beyond China's reach. Reforming the existing international system entails changes in the international order, and if China tries to help bring about those changes, the big global powers would become more suspicious of China, and thus thwart its peaceful rise.

Under such circumstances, China's highest priority should be development. It also has to address its domestic problems and further improve its people's livelihood.

The author is a senior editor with the Study Times.

(China Daily 02/21/2011 page9)