China's sustainability tests

Can China’s development be sustained? Will its rise be peaceful, or will the scale of change disrupt the stability needed as a basis for ordered expansion? Those are key global questions of our time, both for China, itself, and for the rest of the world with which it has become integrated in the last two decades.

That integration has focused on the economy. Continued strong growth is on the cards, but expansion brings ever-larger questions. Will the government be able to manage a gentle transition from expansion currently running above 11 per cent - it wants to slow this to 7.5 per cent by 2010. Will investment be tamed and consumption increased, the financial system strengthened, bank bad loans minimised, reserves diversified out of US securities, and the currency be allowed to float upwards more quickly than has been the case since the peg was broken in July, 2005? Are the authorities going to continue to treat big state-owned firms as a key source of job preservation, or will the sector become steadily more efficient, shedding employment in heavy industrial areas?

Now that hundreds of millions of workers have been brought into manufacturing exports, Chinese companies face the challenge of moving up the value chain into new sectors - today, assembling IT hardware, tomorrow cars, then planes? In the process, will China make the leap to innovative products, as Hu Jintao advocated at the Party Congress in October 2007, or is it doomed to remain a turn-key assembly plant for the world, stuck in a world of rote learning and politically-motivated intellectual orthodoxy?

It's isn't just the economy

The economy cannot be seen in isolation. Though the private sector and market-minded state enterprises have set the pace, the formal powers of the Communist party and the central government to set the agenda remain formidable. But there are definite signs that the era of dominant central leadership has passed, with Hu Jintao obliged to deal with factions at the top of the leadership and Wen Jiabao finding it hard to implement perfectly sound policies on entrenched interest groups and provincial administrations. In some ways, China today is coming to resemble periods when an imperial dynasty maintained power, but its rulers lacked the clout of the founding fathers.

However strong growth is, national stability involves a host of elements. This channel will present the best thinking and analysis on the factors determining the evolution of the world's most heavily populated country, linking seemingly distant subjects to view China from the inside, and in the round.

The world's last major ruling Communist Party stands at the heart of the road to the future. Minimising its importance and viewing the country through a Western lens of government is a mistake. Hu Jintao is China's Head of State, but his more important job at home is as head of the Chinese Communist Party (CCP).

The Party has sought a new lease of life as stage manager of Chinese-style capitalism. The patriarch, Deng Xiaoping defined this as ' socialism with Chinese characteristics'. The balance between the market and command politics is key to the country's evolution. Though the CCP claims to oversee everything, its central arbiters can lack effective control over their provincial agents, in a re-run of age-old tension between the nation's capital and its varied regions. On top of which, Communist China has another major power source - the People’s Liberation Army, with extensive political and economic influence in addition to its military muscle.

Challenges at home and abroad

The apparatus inherited from the past confronts an avalanche of 21st century domestic problems, among them:

• The weakness of the rule of law and lack of official accountability
• The urban-rural coastal-interior divide
• An ageing population with a weak welfare and pensions system
• High levels of corruption
• Severe ecological degradation with mounting economic costs
• Rising unemployment and a shifting population of tens of millions of migrant workers
• Political and higher education systems which do not encourage innovative thinking

Internationally, China is assuming a growing global role. Its appetite for energy and raw materials is leading it to forge links in the Middle East, Africa and Latin America. It is linked to the United States by trade, its trillion-dollar reserves and its part in helping to fund the Federal Deficit through purchase of US bonds. It has nuclear weapons and is a permanent member of the UN Security Council. European countries are eagerly chasing large infrastructure contracts. Booming exports are fuelling protectionist urges in the OECD area.

Trade with Asia, notably Japan, is booming. The China-Japan-US-Taiwan-Korea pentagram is vital for the future of the fastest growing economic region on earth.

Conclusion

How these elements pan out will determine whether - and in what form - the economic success story of the last quarter-of-a-century continues, whether China can sustain its present trajectory to economic parity with the US by the 2030s and whether it can maintain the stability needed for sustainable expansion and further integration into the world system.

The multiple issues running through the economy, politics and society, and the way they link with one another, compromise the core focus of this channel of Trusted Sources.