What a high-income China means for the world

Country's urban planning and building will need to develop further along with land reform

China's target, in its 13th Five-Year Plan (2016-2020), of reaching World Bank-defined high-income country status by 2020 is achievable.

Using gross national income, the World Bank's method of comparing countries by economic size per head of population, in 1990 the United States was 72 times wealthier than China. By 2010, the gap had shrunk to 12 times.

To reach World Bank high-income status by 2020, China's GNI per capita needs only to grow by just over 8 percent each year.

On the way, it will pass Brazil, Turkey, Panama and Malaysia, to join the ranks of Poland, Venezuela and Caribbean Antigua.

China's GNI promotion will still leave it far below rich countries like Norway, Switzerland and the United States.

But its huge population means that its arrival in the exclusive group of high-income countries will have a large global impact.

By 2020, Chinese consumers will have become a global consumption force of enormous significance and power. Not only will this group have become the main driver of the Chinese economy, but it is difficult to think of any region or market in the world where, by then, its consumers will not be the dominant force.

And that is not the end of the matter, because by 2030, China's consumer population could have doubled from 2020.

If you think of China today as a baby elephant squeezed into a room which is already too small for it, what will the elephant, still only half-grown, look like in the same room in 2020? Or in 2030?

The inflow of Chinese consumers will soon swamp countries like Switzerland and Norway, and cities like Paris, London and New York.

How will the world's luxury brands be able to meet the demand from 200 million new consumers?

To some extent, the price mechanism will take the strain. Prices will continue rising, to reflect new demand.

But we can already see, from real estate in New York and London, that the marginal effect of wealthy Chinese purchases is driving prices far beyond the means of local residents.

The only British people who still live in London are people who bought their apartments 10 or 20 years ago.

New real estate developments there are aimed at investors from China (or Singapore), with two-bed apartments starting around 300,000 pounds ($497,000, 377,000 euros).

These are cheap for investors from Beijing and Shanghai, but they are beyond the means of almost all British people.

These real estate phenomena may represent the tail-end of a global boom driven by ultra-low interest rates and in some cases plentiful credit, but the theme everywhere is the same: an increasing worldwide shortage driven by demand from a growing army of wealthy Chinese consumers.

The classic response to strong demand and high prices is increased supply. Already, the China-driven metals boom of the past decade has made Australia into one of the world's wealthiest countries.

The same phenomenon has transformed the economic fortunes of many other countries like Brazil (iron ore and soyabeans), Chile (copper) and New Zealand (milk and meat).

In real estate, new supply is slow to arrive, or in cities such as London and New York, almost non-existent, and prices will probably continue to rise to even more unaffordable levels.

But in most other global product markets, the arrival of the Chinese consumer could be another present from heaven, this time to countries with well-established cultures that are interesting to the newly affluent Chinese.

China's growing economic influence is affecting its global position. But can China rise to the challenge of global leadership, knowing that this challenge requires it to integrate itself more thoroughly into the global political economy, and work more closely with countries like the United States?

And can the rest of the world learn to live with a more powerful China?

On the one hand, the rest of the world craves Chinese economic growth and in most cases Chinese investment. On the other, China's arrival is disrupting the existing order.

China's accommodation within existing global governance systems depends on the attitude of the existing developed countries, led by the United States.

Given the US' determination to cling onto its dominant superpower position, it seems likely that China will need to go on developing its own systems of regional governance, like the new BRICs development bank, and the Shanghai Co-operation Organization, both of which stand outside the old post-war system led by the G7 countries.

As for China itself, its new wealth will be displayed in hundreds of new, large, modern urban centers, located mostly in the middle and west of the country and linked by new roads and railways.

The rules in China for using agricultural land for urban development will need to be refined and strengthened before this huge additional movement from the country to the towns.

But for this to happen, Chinese urban planning and building will need to develop further.

Let's hope that the hundreds of new towns to be built in China will reflect a profound concern for environmental preservation in tune with ancient Chinese culture.

In this way China can become a world leader in a kind of urban development that is environmentally positive as well as beautiful.

The author is a visiting professor at Guanghua School of Management, Peking University. The views do not necessarily reflect those of China Daily.

(China Daily Africa Weekly 08/29/2014 page9)