China's two-sided 'miracle' should warn the ebullient

CHANGCHUN/LONDON — Is China the economic locomotive that will lift the world back onto the growth path and help eradicate its vast debts?

Certainly China's performance over the past year has been amazing, if the figures are to believed. Sustained by a huge expansion of bank credit, the country is registering year-on-year growth of almost 8 percent, with still higher levels expected next year.

Of course, China, as a vast exporter of consumer goods to the West and the Middle East, has been not unscathed by the global collapse. But pictures of closed factories, bankrupt manufacturers, deserted towns, and tens of millions out of work and going back to the countryside certainly contrast with those of a major inland city like Changchun, the center of China's nascent motor industry.

Coastal cities in China may have taken a big hit, but inland things look very different. Gone is the image of an inward-looking China, the Middle Kingdom, churning out low-tech consumer goods and dumping them in uncaring style on world markets.

And gone is the image of antipathy and hostility toward foreigners and foreign investment. The declared aim is to be part of the global network, importing and exporting the latest technologies and making Changchun one of the world's biggest "auto cities."

Significantly, the recently opened Northeast Asia Expo in Changchun not only features the latest Japanese products — and remember the Japanese historic track record in this region is, to put it mildly, not too good — but also a big space reserved for the latest Taiwan products. Politics may still produce Taiwan headaches, but business is leaping the barriers and roaring ahead.

China's own autos may still be on the chunky side, not yet quite catching up with the new age of smaller electric and hybrid vehicles in which Japan has so skillfully led the world so far. But it does not take much vision to foresee an avalanche of well-made and "greener," yet competitively cheap, small vehicles pouring into world markets while supplying tens of millions of Chinese who want to swap their bicycles for motorcars.

Somewhere not far ahead it is plausible to see the Chinese consumer taking over from the American consumer as the world economy's driver, with China's huge and destabilizing trade surpluses at last falling and China's titanic but dangerous trillions of dollar reserves being gradually put to practical use in the global equation.

But we are not there yet. This picture of hope, and of glittering boulevards, booming prosperity, soaring skyscrapers and car-filled highways, needs to be carefully balanced. It is only half, or less than half, the Chinese scene. The other half is still a sea of rural poverty, evidence of rural political discontent that keeps China's overall economic weight well down the world scale.

For all its dynamism, and its impressively high savings rate, China still accounts for only 8 percent of world output. Its annual income per head is still only $6,000 to $7,000, putting it above the poorest developing countries but still light years away from per capita income in Japan, America, Western Europe or the richer centers of Asia like Singapore. China remains a poor country, as its leaders quite frankly concede.

And for all the talk of global networking and a world role, there is still an element of irresponsibility and neglect in China's international stance and attitudes. Great amounts of talk exists suggesting China on "the low carbon path," but actions have yet to follow.

The official story is that China does not intervene in the affairs of other countries; it merely gets on with its own affairs and with business and trade. That sounds reasonable and the unthinking observer might even argue that nonintervention is better than the overly interventionist zealotry of America and others such as the United Kingdom, which has led to quagmires in Iraq and Afghanistan.

But the reality is that the Chinese presence in African states, in Sri Lanka and in many other countries inevitably has major political impacts that are disingenuous to ignore.

China's big investment in Sudan, as part of its scramble for world oil and gas resources, has been a key contributor to the war horrors there. China's turning of a still half-blind eye to the dangerous antics of North Korea is nothing less than abdication of responsibility that a serious world power should take on. The extent to which China cooperates in curbing greenhouse gases will be decisive for everybody else.

Nor can China pretend that exporting high-tech weaponry around the world is a neutral activity. It is far from that.

Moreover, in a world threatened by a return of trade protectionism and with nations struggling to protect their citizens' jobs, China remains a laggard in removing subsidies and other distortions of open and fair trade. Keeping the super-strong Chinese yuan nice and low against other currencies may provide a warm feeling, but in the interests of world balances it should probably be allowed to rise to fairer levels.

Those are the negative aspects of the Chinese "miracle," and it should be a clear warning to those prone to economic ebullience that politics can always poison economics and often does.

But it would be myopic not to recognize that globalization, even in its present shaky state, has helped China mightily and that China is helping keep globalization intact.

How ironic it would be if, just when some people in the democratic West are losing faith in the dynamic of global capitalism, an awakening but still undemocratic China, after centuries of inward-looking stagnation, was to jointhe 21st century and rescue the open capitalist system.