We know China is home to one of the planet's oldest and continuous civilizations dating back more than six millennia, and, with more than 1.3 billion inhabitants, comprises about 20 percent of the world's population in a land mass about the size of the United States.
And everyone is well-aware China's best-known scientific discovery is, of course, gunpowder, developed in the 9th century. (But did you know its alchemists actually were searching for an “immortality compound” and came up with black powder instead?)
You also may have known the Chinese invented the compass, paper (not papyrus) and movable type for printing, blast furnaces to create cast iron, the crossbow, the propeller and the use of natural gas as a fuel, all while Europe foundered in the Dark Ages.
China fell into its own scientific and economic dark ages for three centuries as Europe and, later, America, awoke to The Enlightenment and Industrial Revolution, but seems determined to make up for lost time at an almost breathtaking pace.
For example, China now has about 35 million vehicles on its roads (one-third privately owned), compared with more than 250 million in the U.S., but is adding more than 9 million new vehicles a year, most purchased, as you would expect, by first-time buyers, and nearly all (96%) purchased with cash.
China's current favorite status car: black Buick sedans and mini-vans. Buick sales in China now exceed its sales in the U.S. and, in fact, General Motors sells one of seven new cars in China. Privately owned vehicles may be on track for more than 130 million units by 2020. China is now the world's third largest auto making country, and, at this pace, will become number one in less than a decade.
Which is a small part of the reason China's economic growth is averaging around 10 percent annually (10.4% for the first half of 2008) and why its most recent year GDP has grown to nearly $7 trillion, about half that of the U.S. and about half of the European Union's 2007 output. (EU, America and China now comprise half of total world output of about $65 trillion.)
For perspective, at a steady growth rate of 8 percent annually in China, and 3 percent in the U.S., China's economic output could exceed ours in fewer than 15 years.
China now makes a third, but consumes half, of the world's steel and remains the number one producer and user of coal, more than the next three highest consuming nations (Russia, India and the U.S.) combined, which may be evident in the form of smog when the Olympics are televised this month.
It's coal fires more than 2,000 electric generating plants, and China puts into operation a new coal-fired utility about once a week, all of which has helped China become the world's top carbon dioxide emitter in 2006, overtaking the United States.
And where is all that cement and steel and electricity going? To support “the largest migration in human history,” according to Ted Koppell in a recent Discovery Channel documentary.
China now boasts 15 urban areas with populations exceeding 10 million (the U.S., three), the largest of which is Shanghai, at 18.5 million, about the size of our New York MSA. More than 60 other Chinese cities have populations between one million and 10 million, and most of those average more than five million.
Chongqing, in central-western China on the Yangtze River, now at 14 million with plans for 20 million, could be “the most populous city Americans have never heard of,” says Koppell. Its swelling urban ranks are representative of a generational trend which has seen 400 million rural residents pull up stakes for the cities between 1978 and 2005 with no sign of slowing.
In a generation, China's economic explosion has lifted 300 million people out of poverty, and its middle class, which now numbers 100 million, is expected to swell to more than 700 million a scant dozen years from now.
Huge factories, some employing as many as 200,000 workers, and the largest of their kind anywhere, crank out everything from pianos to salad shooters to cameras to, yes, Bibles (a million a month in 90 languages, a majority in Mandarin for sale at state-sanctioned churches in China).
Much of that factory output has been destined for America, as evident by the growth in imports from China over the last 15 years.
From less than $5 billion/month a decade ago to a peak of $31.5 billion in October 2007, our demand for inexpensive consumer goods has appeared insatiable (the data spikes represent peak imports ahead of the U.S. holiday season).
Total merchandise imports from China of slightly more than $100 billion in 2000 surged to more than $321 billion last year and are on track for a similar amount in 2008.
While U.S. exports have increased four-fold in the same period to about $65 billion last year and are ahead 20 percent y-o-y in 2008, the cumulative merchandise trade deficit with China since 2000 now exceeds $1.34 trillion.
Much of those dollars have been recycled by China into U.S. Treasury and Agency (Fannie Mae/Freddie Mac) securities, in turn helping to finance our annual budget deficits. As of May 2008, China owned $506 billion of Treasury obligations (almost 10 percent of total publicly held U.S. debt) and $376 billion of Agency bonds.
Unfortunately, converting more than $1.3 trillion U.S. dollars into China's currency the last decade has caused domestic inflation to surge, especially, as in America, in food and fuel, but also, unlike the U.S., in surging wages.
Which means China now has a new export: inflation. In May 2007, for the first time since the Department of Labor began tracking data, Chinese import prices rose, and have continued to rise at an annualized rate of more than 4 percent.
At home, China clearly is concerned about rising food and energy prices, given its obsession to contain social unrest.
China, like many developing countries, subsidizes gasoline and diesel prices (about $2.50/gallon) and despite an increase in June, and another expected after the Olympics, its fuel prices remain well-below developed-nation averages and subsidies will cost the government about $40 billion this year.
Higher fuel prices, however, are not likely to noticeably reduce China's newfound enchantment with automobiles, for in China, as everywhere, privately owned transportation represents a fundamental element of personal freedom, and more than anything is indicative of its substantive transformation.
China's burgeoning auto-nation and its sizzling economic growth is not without its downside, of course, as it wrestles with the massive social, environmental and health issues its economic engine has created.
Millions of new drivers are creating accident-related carnage on a terrifying scale. A quarter of a million road deaths a year, a rate six times the U.S. fatality rate with a fraction of the number of vehicles, makes Chinese roads among the world's most dangerous.
In addition to all the other categories it dominates, China now also holds the distinction of creating a third of the world's garbage. As noted previously, it exceeds the U.S. in carbon dioxide emissions and its sulfur dioxide output, chief cause of acid rain, is more than twice ours.
Acid rain now affects a third of the country's land mass, damaging forests and watersheds in Japan and Korea as well, and contributes to an economic-driven deforestation that has erased three-quarters of China's forests and accelerating a process that, until recently, was annually converting a Rhode Island-sized parcel to desert.
Air pollution, which embarrassingly will be on display in Beijing during the Games despite heroic efforts in recent weeks to temporarily shut down the worst offending sources, and water pollution land 16 major Chinese cities on a list of the world's top 20 worst-polluted metropolitan locations.
It's estimated nearly half the country's water supply is contaminated with biological waste along with industrial pollutants, pesticides and fertilizers.
The government now believes that the lower four-fifths of all Chinese rivers are too polluted for fish, and the Yangtze River, third longest in the world and source of a third of China's fresh water, is so polluted that all life it contains is at risk of extinction, a disaster now regarded by Chinese Academy of Sciences as “largely irreversible.”
A nascent environmental protest movement is growing in China, however, with hundreds, perhaps thousands, of disputes and demonstrations bringing belated attention to what already is becoming a dire ecological situation.
So China, as have all developing nations before it including the United States, must confront its industrial demons and in the future begin to strike a balance between unbridled economic growth and the safety, health and welfare of its people, and must do so on its own volition and timetable.
Investor and commodities expert Jim Rogers, former partner of George Soros, says “China is the next great country” and its economic growth “will be the single most important event of this century.”
“And the best thing you can do for your children is teach them Chinese, “ he says, which from all accounts is easier said than done.
Perhaps he is right. Like Warren Buffett, Mr. Soros and a handful of other über-investors, Mr. Rogers has made a career and several fortunes being more right than wrong.
Television coverage of the Games of the 29th Olympiad begins August 8th, and in addition to the pageantry and competition, we hopefully will get a good look at the China of the new century, the new People's Republic of Capitalism.
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