China – Leading the World Again

Read my speech given on 31 March 2010 to the Institute of International and European Affairs in Dublin, Ireland.

Introduction

Two centuries ago China was the biggest economy in the world. Twenty years from now it will be again.

If the question were to be posed “which country has done best by its own people over the past three decades?” the answer would have to be China. A growth rate of 15% per annum, year after year for over twenty years, is phenomenal but yet that is what the Chinese have done.

It had been argued by economists that consistent growth at this level was inherently impossible but China has proven them to be wrong.

Western economic sages predicted that China couldn’t possibly maintain the pace of its economic growth because it would lead to unsustainable inflation. It would lead to internal conflict as the disparities in wealth between the eastern seaboard and the western provinces increased. Society would tear itself apart. Increased personal wealth would inevitably lead to demands for western style personal “freedoms”, leading to mass emigration of the rich if refused.

None of these things happened. All the predictions were wrong.

In terms of the scale of this achievement no other country can come near China. The fact that economic growth started from a low level, indeed a profound third world base, is sometimes cited as a reason why its accomplishments over the past three decades should be discounted.

The reverse is true. It is the reason why Chinese achievements should be celebrated.

Unprecedented

Never in history has a people come so far, so fast, in so short a time as China. Never in human history have so many people enjoyed economic progress together over such a sustained period of time, in peace with their neighbors and in harmony with the wider world.

Never in human history has a society gone through such profound social change at such a pace. The scale of the movement from the countryside to the cities, the sheer volume of the rebuilding of the cities themselves, the profundity of the transformation of the economic system from centralized planning to a partial market economy and the fundamental shift in social values, as expressed in Deng Xiaoping’s dictum that “to be rich is glorious”, are individually without precedent.

Collectively, they are beyond what western economists, sociologists and political scientists thought possible.

The one child per family policy, for example, is the greatest ever social experiment in history. That on its own would be sufficient for us to stand back in awe.

Context

To understand what is happening in China we need to put things in context. We are talking here of population of 1.3 billion. That number would be better understood by saying “one thousand three hundred million” people and would be best placed in context if we remember that the European Union has a population of five hundred million and the United States a population of just over three hundred million; in other words, only a quarter of the Chinese population.

To move such an enormous amount of people along the path of economic development, and to keep them moving at speed without massive social dislocation, required effort, organisation and the mobilization of resources perhaps previously attempted elsewhere but never achieved at any other time in world history. The scale of the success has been staggering.

The economy is ten times larger than it was when current policies began back in 1978 under Deng Xiaoping. A decade from now it will be the second largest in the world; a decade later, the world’s largest.

Per capita income it has grown by a factor of six. Since 1978, some five hundred million people have been lifted out of poverty. The number of people living in cities has doubled. The rural population has fallen from 82% of the population to 54% – the biggest migration in history.

China is already a global economic power. It accounts for fourteen per cent of world manufacturing output and is the world’s largest exporter of goods and half of GDP comes from industry, with another 40% from services.

China is running a balance of trade surplus of around $180 billion, whereas the EU has a trade deficit of $ 9 billion – but the US a trade deficit of $ 225.

China has accumulated foreign exchange reserves of $2 trillion and is the world’s largest creditor nation.

China is the biggest consumer of copper, lead, zinc, nickel, aluminium and tin, as well as rubber, raw wool, cotton and major oil seeds. It is the second largest consumer of oil and by far the largest consumer of coal.

When it comes to infrastructure the numbers are just as mind bending. Over 6,000 km of expressway are being built annually and 60,000 km has already been constructed. At 64,000 km, the railway network is one of the world’s largest while the merchant fleet is the world’s biggest in terms of vessels.

In power generation, China builds the equivalent of Germany’s power generation system every year. It is the world’s largest importer of hydro carbons.

In terms of lifestyle, the story is just as impressive. China has more mobile phone subscribers than the EU and about the same number of internet users.

It has still a long way to go in terms of personal wealth, with a GDP per head only one sixth of the EU and one eight of the US. But imagine what would happen if China caught up with the US? The number of road vehicles would, for example, increase from forty million to over a thousand million – that is more than all the vehicles now existing in the world.

New Phase of History

In the light of these statistics it is obvious that we are living through a unique phase of world history – and that we need to stand back and reflect upon what is happening before our very eyes.

It is a unique phase of history because China has always been unique. It accounts for one fifth of the world’s population, living in a land mass the same size as the United States.

It is the oldest continuous civilization in the world and the largest and most homogenous society. Over two millennia it has led the world in science and technology, in innovation and discoveries, in the mastery of nature, the conquest of the seas and the exploration of the skies.

Six hundred years ago when Europe was just emerging from the dark ages, and America was as yet undiscovered, China stood at the pinnicle of human achievements, for example through the invention of the printing press, the telescope, the compass and printed currency.

Chinese fleets had already navigated most of the globe in six masters, long before the Portuguese.

Even as late as two centuries ago China was the world’s greatest power dwarfing the nations of Europe individually and collectively: Napoleonic France, Czarist Russia, Wellington’s Britain and Frederick’s Prussia.

The demise of China over the following century and a half was also unique in terms of its scale and duration. But so too has been its resurrection, renewal and reappearance on the world stage.

To understand what is happening we have to understand what makes China unique and why it will once again lead the world. Chinese culture has to be examined to see how it was able to accomplish the “theoretically” impossible.

The Centrality of Confucian Thinking

It is important for the world to understand why the miracle of economic growth depends on the traditions, the values, indeed, all the elements which comprise Chinese civilization.

For me, the big surprise is that China has achieved all that it has without engaging in external conflict. The Chinese seem to have done something that we in the West have not been able to do. For example, they have procured the requisite raw materials for economic growth without strife, without invading anyone, and without deploying any aircraft carriers.

How has this been possible?

To this westerner the answer lies in a set of values which has defined the Chinese civilization for the past 2400 years. For most of that time China led the world in every field of human endeavour.

But most of all, China is a civilization, a civilization whose founding values are most easily found in the Analects and other teachings of Confucius. “What you do not want done to yourself, do not do to others”.

This philosophical insight bears a remarkable similarity to what the Christian Bible says on the same subject. However, it seems to have been followed more diligently in China.

Given that the greatest civilization on the planet has not made a practice of invading and slaughtering other nations, peoples and tribes, we can immediately see the real difference between east and west. The Chinese put more of their moral and social teaching into practice than is usually done in the west.

A cornerstone of Chinese civilization seems to be the absolute centrality of the family in the workings of society.

Another cornerstone is respect for the Government. But the Chinese construct contains guidelines for how the just Government ought to behave. “If you govern people by laws and keep them in order by penalties, they will avoid the penalties and lose their sense of shame. But if you govern them by moral excellence and keep them in order by your dutiful conduct they will retain their sense of shame and also live up to this standard.”

There flows through the teachings of the Master a great sense of doing rather than talking about it: “though the odes be three hundred one phrase can cover them all namely, with purpose undiverted”.

And “I see and I forget, I hear and I remember, I do and I understand”

There is a practicality in the values that Confucius preached. Whereas there is a religious component to his edicts, it is mainly with the building of a solid working well governed society that his teachings are concerned. The absorption of this philosophy of harmony into the very soul of China is what makes it unique and gives the civilisation both coherence and continuity.

The Communist Party

Viewed against this background the Communist Party is not a historical aberration but a continuation of the Confucian system of government. What was added to Chinese culture through the advent of the Communist Party was a twentieth century materialism influenced by the experience of many of its leaders who as youths found themselves exiled in France around the time of the First World War.

They experienced the strikes and the lockouts from the vantage point of workers but also being foreigners, they experienced exploitation at the bottom of the pile. They were thus amenable to Marxist teachings in terms of it s analysis of class divisions and its prescription for class action.

But, the paradox is that the Chinese Communist Party is not Marxist in a classical sense but rather is materialist. It is also profoundly nationalist. As a consequence, society under the Communist Party as a whole remains heavily influenced by Confucius.

Modern China has been shaped and molded by the Communist Party and, in particular, by its leadership, starting with Mao Zedong.

To my mind, it is not possible to overstate what was accomplished politically by Mao He unified the country. The many invaders were thrown out. The whole country was unified under one government. But whereas Mao was a great military and political leader, his economic record was defective and would not stand up to scrutiny. He did however lay the material basis for what was accomplished by Deng Xiaoping at the 1978 Party conference.

Mao modified Confucian thinking in the minds and the culture of the masses. He created the centralized power apparatus, the philosophical thinking which resulted in the cultural acceptance of Deng’s ground breaking assertion that “to be rich is glorious”, memorable phrase I previously quoted.

Chinese society has remained homogeneous, and unified in its cultural world outlook over the past three decades. Despite the huge increase in average wealth, the vast migrations of people, the great disparities in wealth, the Chinese people are still family centered, still very much geographically China orientated, and by and large satisfied with the Government.

I understand why this is: there has been great government in China.

Vital Interest

Now China is about to retake its leading position in global affairs. This time, however, China has a vital interest in what happens in the rest of the world. Today’s world is a different place from the world of 1421. The world population has increased from 375 million to 6,450 million by 2005. And it has been industrialized without regard for nature.

The atmosphere, the land, the rivers and the oceans have been used as dumps for industrial waste. It was thought that they could be used without limit that could be polluted without cost. Burning wood and cutting forests was a normal activity which could be accommodated by nature.

Now everything has changed. Now we know differently.

The atmosphere is the most obvious example of where the limits to human incursion on nature have been reached. Global warming has progressed in proportion to the concentration of CO2 in the atmosphere. The rise in temperature has corresponded to the calculations of the climatologists.

The whole world is affected. It doesn’t matter where the CO2 is put into the atmosphere. The earth’s rotation and the uneven heating of the atmosphere by the sun ensure that the CO2 is distributed randomly. Humans consume 85 million barrels of oil each day. We burn tonnes of coal and therms of natural gas. This releases in excess of 140,000,000 tonnes of CO2 into the atmosphere every day.

China, in particular, is Vulnerable

Every country is affected by this catastrophe. The effects are more obvious in some than in others.

China, in particular, is vulnerable.

Classically, 60% of China is categorized as desert insofar as evaporation exceeds precipitation. This has been so from ancient times. The Himalayas are a major desiccating force, drying out the winds that flow from the south, south west and south east.

Sandy desertification is mainly caused by climate change, but it is also aggrevated to by intensified human activity, particularly since 2000. The fifth biggest desert in the world is the Gobi, with its whispering sands. But it is advancing into the great Corn Belt to the north west of Beijing. It can also be noted that there is a new desert forming on the eastern reaches of the Himalayas.

This is happening in spite of tremendous efforts being made by China in the management of arid lands. The shelterbelt programmes which have been undertaken over the past 20 years are bearing considerable fruit.

One cannot but be impressed by the way China has managed to build railways across the desert areas, areas whose sands are moving, or the way that she has built the shelter belt programmes in the middle reaches of the Yangtze. Or again, countering the onward march of the Gobi towards Beijing, involving Tianjin, Hebei, Shanxi, and Inner Mongolia, with 75 counties in total, with a comprehensive series of control measures.

These include

· Conversion of cropland to forest

· Afforestation,

· Manual grass planting

· Aerial seeding enclosures, grassland construction,

· Grazing prohibition,

· Warm shed building,

· Riverhead projects

· Water saving irrigation projects, and

· Eco immigration involving 180,000 people.

One result of these efforts has been reported in 2006, as follows: compared to 1999 the national desertified land area decreased by 37,900 kilometers squared or 7,600 km2 per annum.

Defending China

Global CO2 emissions, however, keep on increasing each year. It has been estimated that the concentration of CO2 in the atmosphere increases annually by 1 ½ ppmv. Given that the primary cause of sandy desertification in China is climate change, it will progressively become more expensive for the Chinese people to protect their country from this scourge.

We do not say it cannot be done; we say that the difficulty of doing it will increase, and the cost will go up exponentially.

Trying to defend China will become progressively more difficult as human-induced global warming progresses. There is yet another threat to the prosperity of China. I refer to the diminution of the glaciers on the Himalayas. We are looking at a process that could take 100 to 200 years, not decades as erroneously reported in the un-peer reviewed, IPCC report of 2007.

The main cause of the problem appears to be coal burning in India. The sooty, black particulate matter, mainly carbon, gets deposited on the Himalayas. Instead of the snow and ice reflecting the incident radiation back into space, the black particles absorb the radiation and locally heat and melt the snow. This will lead to increased runoff of water in the short term, but would be disastrous for China in the next century. Imagine the state of desertification of China if its great river systems were to dry up.

The back bone of China’s ecological infrastructure is the three great rivers. These will have to be protected at all costs. It could be said that rivers define civilizations. They become the main centres of settlement and operate as great trade arteries. In that regard the Himalayas are the life blood of China.

If the flow of water on the rivers speeds up as a result of the melting phenomenon then it will have significant physical effects, such as from silting. This, for example, will adversely affect the dams that help generate electricity – a problem that has also affected a country such as Chile.

Need for Action

When I look at the future I see China threatened more than any other nation by the runaway interference with the atmosphere that is now going on, perhaps not as much as the Maldives and a large part of Bangladesh. They will disappear under the sea. But if the great rivers dry up in China, or if they are reduced greatly in flow rate, then the water needed for irrigation, industrial cooling and processing, for drinking and for naturally combating desertification, will simply not be available.

The very fabric of society and the basis of the economy will have been undermined. History will have been reversed.

China needs to act now to protect itself from global warming. I know that it is indeed doing so, and doing so with considerable success, but the task becomes more difficult with every passing year.

I have a selfish reason for wanting China to act now. We in Europe have been ploughing a relatively lone furrow in trying to combat global warming. The EU has legislated that Europe will double its renewable energy sources by 2020. We will actually make 34% of our electricity from renewable sources by then.

We have piloted the know-how of making wind turbines, of photovoltaics, of concentrated solar, of long range transmission of electricity by DC. More importantly, we have found out how to create a market in renewables. The renewable energy feed-in-tariffs, which got wind and solar going in Germany, Denmark, and Spain, are the fastest way of getting the new sustainable energy deployed in open market situations.

But, as was seen in Copenhagen, the voice of Europe was not enough to propel the world in the right direction fast enough.

Chinese Leadership

Something else was also observed in Copenhagen. China had, and has, a massive advantage when it comes to the leadership of the developing world. It would appear to this observer that it was China and not the USA which commanded the respect of the developing world. We should be aware that the US President only decided to go to Copenhagen only when it became clear that the Chinese President was going to be present.

The reason why China can lead the developing world is because it does not engage in regime change. China trades profoundly with the rest of the world, including the developing world, just as it did in the 14th century. Resort to the use of force or the invasion of surrounding countries, even when it was obvious that China could have done so, never really became a factor in Chinese foreign policy. I believe China’s relations with its trading partners to be altogether more civilized than we in the west pursued this past century with the Americas, Africa or Asia.

Energy

In terms of the fight against global warming we are also aware that China is the largest producer of energy in the world and hence has the greatest responsibility in reducing Greenhouse gas emissions. For that reason I was delighted to see that last year China became the fastest growing wind energy country in the world.

The trend is clear. The cumulative installed capacity of wind has literally doubled each year since 2004 and had reached 12,210 MW by 2008. 13000 mw was installed in 2009, some 100% growth. While this was only 2% of installed capacity the progress being made is not just encouraging but has all the appearances of another Chinese miracle in the making.

Some eighty companies are reported to be building wind machines in China and according to a privately commissioned study some 150 GW of wind are likely to be built by 2020. This would contribute a non-hydro market share for renewables of 8%.

Inner Mongolia has the highest target with 57.8 GWs. We have even seen China propose the building of big wind farms at sea. For a country which has been able to do the incredible things outlined earlier, I consider 150 GW to be on the low side in terms of ambition. China is the one country in the world that can outperform Europe percentage-wise in the deployment of renewables. What about a target of 20% by 2020, moving to 50% by 2030?

On the negative side, however, 77% of Chinese power generation is coal based and most of the new build in power generation is coming from coal. It lags the west in respect of the pace at which power generation is being decarbonised. The contrast is that during 2008 and 2009 new wind generation plant built in Europe and the US exceeded all other forms of new generation build.

China will have to do the same because the key economic variable determining GHG emissions will be electricity consumption. By 2020 domestic Chinese consumption will have grown faster than the global and unless it is predominately green the greenhouse gas effect will be devastating.

Added to that, we will be on the point of scarcity in respect of minerals. Hence, we need total sustainability regarding resources such as water and minerals, especially rare minerals like platinum and phosphorous.

The sea itself will become a critical consideration and there will have to be a marine component to a holistic approach to sustainability.

Moderation in Growth

Economic growth will, of course, slow down in China. That is inevitable. But even more moderate rates of growth will stretch resources and this in turn suggests the absolute imperative of shifting to a global sustainability model. This need becomes all the more acute when India is factored in as an additional source of demand.

It cannot be forgotten that, at present, China by and large feeds itself even though a mere 7% of the land is suitable for agriculture. The situation is, however, changing because China has a huge and growing appetite for animal protein. The Chinese are now big meat eaters and annual consumption has, for example, gone from 20 kgs per person in 1980 to 54 kgs last year.

Food consumption will continue to increase as a consequence of increased prosperity. This need for food is also pushing China into major geo-political deals, such as with Brazil for soya bean. This, in turn, has adverse environmental effects on Brazil due to the clearance of forests.

From a global perspective, China will have to find a more environmentally acceptable solution to providing its population with adequate supplies of food.

Irish Policy on China

We in Ireland should prepare for a future in which China evolves into the dominant force in the world and becomes what it has always seen itself to be, the Middle Kingdom around which the rest of the world revolves.

We should begin by developing an extensive expertise in the Chinese language and culture and by developing intensive trade relations with the economic authorities, particularly in food and especially in free range beef, in which we excel as a clean and low cost producer.

I note a recent UCD study which identifies a growing need within Irish companies for Chinese speakers and I was delighted to learn that the Loreto Convent in Bray is pioneering a pilot project in teaching Mandarin at second level, with great success as we heard on RTÉ radio last week.

I am encouraged to learn also of the interest within the Irish farming organizations and Irish agri-business generally in developing beef and other food exports to China. The demand for meat will be insatiable and we should aim as a central plank of our export policy to supply the Chinese market on the basis of a long term trade agreement designed to bring mutual benefit to both countries.

To do that successively we will need to have a coherent and consistent strategic foreign policy framework in which China becomes the centre piece. But to be successful in this fundamental shift in the conduct of our foreign relations I want to emphasise the importance of learning the language because it is the key to understanding this great civilization.

To have a second language, it is said, is to have a second mind. We will need that second mind in order to prosper in the future that lies ahead, one in which China will again lead the world.

Conclusion

In summary, China has to lead the world because it will suffer the most from global warming, the common threat that confronts all mankind. China can build the technology and it has the credibility to lead the Third World in implementing agreed policies to mitigate carbon emissions.

In my view, China will succeed in both developing the technology and providing the leadership. It will succeed because of the central role which Chinese society has always subscribed to meritocracy and the emphasis within Confucianism on action, that combination which explains the Chinese economic success of the past three decades.

A culture which is focused on action but also on the need to retain wisdom and hence to maintain respect for its elders is guaranteed to succeed.

The decades ahead will be even more dramatic than those which have just gone. China will continue on the path to economic development. It will raise another seven hundred million people to the standard of living already achieved by the rest of society. And it will lift the average income across society closer to our own.

It will do so by adapting its ancient culture to the needs of tomorrow. It will go its own way in terms of political, social and economic organisation, a way that we in the west must respect and with which we must work.

The presence of China is now the most distinguishing feature of a globalised world. It is a process that cannot be reversed. It can only be embraced and turned to everybody’s advantage.

But I profoundly believe that all parties will enjoy mutuality of benefit only if there is mutuality of respect. With regards to China that respect must be based on an understanding of its past, of its uniqueness as a civilization, of the scale of its current achievements and of the grandeur of the future that awaits it.

That is my message here today. As China led the world in the past, so will it once again lead the world in the future.

And that future is upon us.