[Viewpoint] Planning for China’s hegemony

The Chinese economy has been galloping away at an average annual pace of 10 percent for the last three decades.

The pace beats Korea’s 9.7 percent average during its first 30 years of industrialization from 1962 to 1991, Taiwan’s 8.8 percent from 1957 to 1986, and Japan’s 8.3 percent from 1946 to 1975. In comparison, Great Britain, Europe and the United States grew from 2 percent to 4 percent during their economic leaps in the 18th and 19th centuries.

Even if China’s growth falls to between 5 percent and 6 percent over the next two decades, the country will soon match our per capita income level of $20,000. If its currency is allowed to appreciate to reflect its economic might, the country will attain such an income level much earlier. In one or two decades, there will be around 30 countries with economies similar in size to ours.

While Korea grew its per capita income from $5,000 to $20,000, the global economy underwent changes, adjusting economic policies and systems as well as manufacturing and exporting structures.

In turn, the exceptional growth of the four Asian tigers - Korea, Taiwan, Hong Kong and Singapore - caused few ripples in the global economy.

But China’s ascent to a high-income industrialized economy in the next few decades will reshape the world economy. The world will have to adjust to having scarcer commodities and accommodate environmental pollution from massive Chinese-funded investments and consumer spending. Economies will be flooded by a cascade of cheaper Chinese products and services.

When China reaches a per capita income of $20,000, the world will become China’s oyster.

Taiwan, Hong Kong and Singapore - which are also run by ethnic Chinese - have already entered the $20,000 income threshold. There is no reason why the mainland, with its broader and better pool of human resources and tradition, cannot join the ranks.

All other Asian countries with the same Confucian roots - except North Korea and Vietnam - have graduated into becoming advanced economies.

The next two decades will bring about staggering changes and conflict within China as well as with the world. A China with a $20,000 per capita income will outshine the U.S. economy in many ways. It would become the largest stakeholder in international lenders like the International Monetary Fund and the World Bank if they remain viable until then.

And China will be a powerhouse, wielding enormous clout in international forums and the global economic order. The renminbi will become as much of a standard in the global market as the U.S. dollar.

But an economy with such influence can no longer be state-controlled. Funds, foreign exchange rates and interest rates will have to be liberalized. China’s rise to becoming the world’s largest economy will be entirely different from Japan’s ascent to second place. The hegemony in the global economy will fall into the hands of the world’s most populous country.

Korea saw enormous political and economic changes when its income base expanded four-fold in the span of two to three decades. But its growth was not without pain. Korea had to endure turbulent democratization and costly lessons from the Asian financial crisis of the late 1990s.

No country can sustain an imbalance between economic and political freedoms for long. Autocracy eventually crumbles once an economy becomes wealthier and developed.

China’s economic success will most likely accelerate demands for reform in its political system. Different forces could come together and shake China’s economic and political landscapes to pursue greater balance between political and economic freedoms.

Japan during the postwar period as well as Korea and Taiwan during their industrialization in the 1980s and 1990s transformed into democratic societies as a result of a deepening imbalance.

China will have to accelerate liberalizing reforms if it wants to achieve high income, but that will come at the cost of political instability and democratization. The changes could also spill over to North Korea.

We must realign our state strategy with the recognition of China’s inevitable hegemony in the coming years. China, the world and the Korean Peninsula will face turmoil in the next one or two decades.

But how prepared are we? Do we have reliable leadership and social potential as well as economic resilience to weather the enormous historical headwind? We don’t have much time to get our act together.

*The writer is a professor at Sogang University Graduate School of International Studies.

By Cho Yoon-je