'China to Replace US as the Engine for World Economy'

Taking advantage of World Economic Forum Asian Department Director Dr. Richter's visit to China, our reporter recently conducted an exclusive interview with him on such hot issues as the prospect of China's economy, and the development trend of the world economy. Dr. Richter indicated that China is expected to become a new "engine" for world economic development within five years because it is one of the few bright points of the world economy.

Reporter: The UN, the IMF and other organizations have, in their regular economic reports, lowered their anticipated world economic growth, the US-centered global economic recession tends to become increasingly serious, what's your view about this and when can the world economy get out of a slump?

Richter: The figures released recently by The United Nations Conference on Trade and Development (UNCTAD) show that Foreign Direct Investment (FDI) globe-wide dropped 50 percent compared with last year, this is a very pessimistic figure, among all regions including the United States, Europe and Japan, only investment made in China has witnessed growth, the world economy presents not an optimistic outlook, the globe will possibly enter a new recession which will last a longer time. There exist problems with some large transnational corporations of Europe and America, such as the famous American Ford and Italian Fiat, and some transnational corporations even face the danger of being closed.

The US economy once had all along been the engine for world economic development, but now it is faced with predicament and plagued by chaos, under such circumstances, who can replace the United States to become the engine for world economic development? Is it Europe, Japan or China? The situation in Europe does not make one feel optimistic either, although Japan presently remains the world's second largest economic entity, its banking system is faced with many difficult problems, if its banking system is properly rectified, it may give new hopes, but due to its domestic problems, it is impossible for Japan to replace the United States. Then, who, after all, can replace the United States? Only China! China's economic situation is very good, not only its domestic situation is favorable, but also more and more overseas investments are turned to China which is hopefully to take the place of the United States in five years to become the main motive force for global economic growth.

Reporter: What influence will the deteriorating external environment exert on China's economic development?

Richter: China will not suffer from negative influence, on the contrary, it will possibly get benefit therefrom. China is one of the bright points of the global economy, and it will attract more and more foreign investments. Of course, China also has competitive rivals, both India and Mexico are trying to attract foreign capital.

Reporter: Would you please give a forecast of the prospect for China's economic development, what favorable and unfavorable factors are therein, especially in the aftermath of China's WTO Entry?

Richter: The competitiveness of China's economy is growing in strength, not only State-owned enterprises, but private enterprises as well are witnessing ever-faster development, Chinese enterprises have taken an encouraging step toward globalization, such as Hairer, Legend and TCL, their products are rapidly entering European and American markets, these companies are developing step by step to become global transnational corporations. From a long-term point of view, joining the WTO is beneficial to China, perhaps many transnational companies may create some sort of impact and bring competition on Chinese enterprises, but this is beneficial to China, because only under competitive conditions, can Chinese enterprises experience rapid growth and China's markets become more mature and perfect. In the past, many domestic enterprises were only faced with domestic markets, but now they are confronted with large global markets. Many domestic enterprises have begun to buy up foreign enterprises, for instance, the Shanghai Auto Group participates in buying the share of the ROK's , Daewoo, Petro-China invested in Indonesia and bought the share of an Indonesian oil company.

Of course, China also faces problems that must not be neglected, such as the gap between the east and west economic development, unemployment and the problem relating to the ?¡ãoverheated?¡À infrastructure construction in various localities.

Reporter: In the first half of this year, you stated in one article carried on the Singaporean Strait Times that the Group 8 (the United States, Japan, Germany, France, Italy, Britain, Canada and Russia) should accept China as one of its members. You enumerated in the article many reasons for this, in your opinion, what's the most important point?

Richter: Western countries should change their views about China, many European and American people know little about the situation in China, they should come more often to see for themselves. As to the most important reason, let me give an example. As a member of Group 8, Italy's total GDP amount is incomparable with that of China staying outside the Group, this is the most important index, if Group 8 wants to be representative in the world, it should not neglect the existence of China. Of course, involved here are not only economic factors, but also political factors. The importance of China's economic development has been recognized by more and more people, Western countries should treat China as an equal partner as soon as possible.

Reporter: There are some experts and scholars in the world who express doubts about the truth of China's economic statistics. What do you think about this issue?

Rocjter: I believe that the figures provided by official Chinese sources on economic growth are correct, the trends of China's economic growth are clear to all. Since China is a large country, the composition of various statistical data is very complicated, although we cannot avoid the existence of small errors, whether the growth is 7 percent or 8 percent is not important, small errors will not exert much influence, what is important is that China's economy is still growing steadily.

Reporter: It is said that you are writing a new book on China. Can you say something about this book, what kind of viewpoint are you to present to the readers?

Richter: In this book I will focus on the discussion of three possible scenarios for China's economic development: first, China to replace the United States to become the engine for world economic development; second, China will be plagued by a variety of problems such as stagflation of the Chinese economy and unemployment; third, a mixture of the above two kinds of situation. I think the first scenario is most likely to happen, that is, China will become the engine for world economic development.

In Asia, business and government activity is often blurred. In Japan, Korea, Taiwan, and even mainland China, one can only really say that about 50% of their GDP's derive from the private sector while the rest still derives from the public sector. A 50% ratio isn't bad. European countries also have about a 50% ratio. The US is unique in that it has a 67% ratio of private-vs.-public economic activity. In Taiwan today, much of "democratic" Taiwan's major industries are still government-owned. For example, Taiwan's #1 airline. While it would be desirable if China had a 67% or higher ratio right now, China's only been capitalist for 20 years or so, so 50% now isn't so bad. You can't turn a 100% communist economy into a 100% laissez-faire capitalist economy overnight. Russia actually tried that but "shock therapy" there wasn't particularly effective. You mentioned Poland's Solidarity labor movement, but are you aware that the Polish government is about to re-nationalize the shipyard from which Lech Walesa led that labor movement. After 10 years of being disillusioned with democracy and capitalism, the Polish want to renationalize their industries! Similarly, throughout democratic Latin America today, people are disillusioned with the democratic/capitalistic model and voting into leftist socialists back into power as we speak. Witness Brazil today where socialist Lula got elected by a wide majority. You gave these people the vote, but now they're voting to put the big-government socialists back into power! It's bad bad Latin American countries first adopted democracy about 20 years in the first place. Their GDP growth rates today are only 1/10th what they were in the prior 20 years, when they were led by authoritarian regimes. At the end of the day, the issue is whether the government has improved the quality of the people's lives or not, regarless of the form of the government. Two generations of poor, illiterate Indians have wasted their lives and continue to live in poverty during the past 50 years, while the one-party regimes of E. Asia leaped from Third to First World status in a generation. India is "free" and democratic, but mostly they use this freedom to engage in neverending gridlock in their legislatures with the result that needed economic reforms never see the light of day. Democracy works well in countries that are already rich and have already developed majority-middle class populations, but in majority-poor Third World countries, democracy is a formula for majority-socialist politicians to come to power and block every economic reform imaginable such as privatization because their majority-poor constituents don't want to lose their welfare and jobs in the welfare state anytime soon.

That's a lie. The current political ruling party, the BJP, has now been in power for over 5 years, having recently won re-election last year.

Before that, the Indian National Congress party held power for almost 9 years.

And even before that, the Janata Party held political power for 4 years. Before them, the Indian National Congress held power from 1937 to 1977, almost for forty years.

Let me tell you boy, it doesn't get any more stable than that. Enough of your lies and disinformation. Check out the following link if you don't believe me.

Indian Political History

The current Indian administration has been in power longer than usual, but as I'm sure you know, Vajpayee is weak and once again India's economic reforms are on the backburner. I read Indian newspapers just to read all the self-flagellation that seems to be an Indian pasttime these days about how India is continuing to lag China economically. You know, a lot of Indians have asked themselves why this is the case and they often conclude, like GE's CEO recently did, that India's government just isn't as centralized or consistent as China's in pursuing economic reforms single-mindedly over the long term.

The current Indian administration is also not just the BJP but a coalition of some 20-25 different political parties, of which the BJP is the leading member. Merely to cobble together such a coalition involves many compromises and the end result that even the BJP cannot pursue essential economic reforms like labor and land reform or else its coalition will fall apart. This type of scenario is India's and most other Third World republics' neverending situation. Democracy in both First World and Third World countries often involves gridlock but Third World countries suffer more because it is they that need economic reforms more desperately, whereas First World countries are already rich.

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