Monday, October 19, 2009

China's model creates economic miracle

As celebrations of its achievements over the past 60 years subside, China can look forward to its next milestone: surpassing Japan as the world's second largest economy before the year is out. Another target reached ahead of schedule - and further evidence that China is emerging from the financial crisis as the big winner.

Based on past records, and taking into account China's expected growth rate over the next two decades, China will overtake the United States to become the largest economy in the world within five years measured in purchasing power parity-terms, and within 20 years measured in nominal terms.

It could be even sooner. These predictions are based on the assumption that the US economy will grow 3 percent per year and the Chinese economy 9 percent per year, assuming constant nominal exchange and inflation rates for both countries.

But if the yuan continues to appreciate against the dollar as it has done in the past decade, and/or if China's domestic inflation rate is higher than that of the US, China will gain ground even quicker.

Much will depend on China's ability to adjust its economic growth model in the face of huge environmental pressures. China had become the largest producer of many key industrial and agricultural products by 2007, including rolled steel (566 million tons), coal (2.5 billion tons), chemical fertilizers (58 million tons) and personal computers (121 million, or 30 percent of the world's output).

It produces two-thirds of the world's photocopiers, microwaves and shoes, 60 percent of mobile phones and 75 percent of toys. In 2009, China may well overtake the US to become the world's largest consumer and producer of motor vehicles. This huge leap in production and consumption has caused serious damage to the environment.

But one of the opportunities brought about by the financial crisis - and subsequently declining exports - is that Chinese companies have been forced to increase their competitiveness by moving up the technological ladder. Many are rebalancing their geographical distribution and becoming more efficient in their use of resources and energy.

Also to China's advantage - in the short term at least - are the depressed oil and material prices, which has helped China sustain high economic growth as it is the largest importer of such commodities.

The gradual shift away from an economy reliant on low-cost exports will be tough but China has a clear national strategy to become a powerful world business leader. The government has been supporting and fostering a large number of gigantic State-owned industrial groups. These selected groups have been allowed to grow rapidly in size and profitability domestically, and then encouraged by the State to expand globally.

State-owned banks are providing strong financial support for them to make foreign acquisitions and deepen foreign market penetration. Through capturing market share and making acquisitions overseas, they are competing directly with, or working alongside, the world's most powerful transnational corporations.

There have been unforeseen setbacks. China National Offshore Oil Corporation failed in a bid to acquire Unocal in 2005, and in June 2009 the Chinalco-Rio Tinto deal came to a sorry end for the Chinese.

China has learnt from these disappointments. Recent overseas successes include Sinopec's US$7.5 billion acquisition of the Canadian oil company Addax in August and Minmetals' US$1.38 billion purchase of Australia's Oz Minerals in June. Chinese firms have embarked on their new Long March in the global economy - and they will come back stronger after every defeat.

For all the criticisms of its political structure and one-party rule, China has time and again demonstrated to the rest of the world that its political and economic model can be an effective tool for economic success.

The key to this model is not down to its capacity to copy from the Western development model, but to its ability to take the advantages of the Western model and modify them to suit the reality of Chinese culture and society.

In doing so, China has successfully combined the advantages of the State and market, public and private ownership, capitalism and socialism. This model boils down to Deng Xiaoping's pragmatism and experimentalism of economic, social and political reforms: a Socialist Market Economy with Chinese Characteristics.

The resilience of the Chinese economy during the worst months of the financial crisis has added significant weight to this development model and provided a further boost to Chinese confidence.

The author is professor of Economics and head of the School of Contemporary Chinese Studies at the University of Nottingham in the UK.

A Russian mafia hit job?


As police on Sunday investigate whether a business dispute led to the brutal slaying of three generations of the Oshrenko family in Rishon Lezion, some crime experts have raised the possibility that a Russian or Caucasus-affiliated mafia outfit was behind the single worst act of multiple homicide in Israeli crime history.

"Yes, Georgian and Russian mobsters do these things, as do Columbian and Thai mafia organizations," said Prof. Menachem Amir, of the Hebrew University's Criminology Institute.

"This happened in Tel Aviv in 1995, when a Georgian hit man shot dead a man who was in debt to a mafia baron, and shot dead his grandmother too, before beheading them both and wrapping their heads in a carpet," Amir said.

"The hit man, who was sentenced to two life sentences in prison, has to this day refused to disclose the location of the missing heads of his victims, or the name of the man who sent him.

"Entire families are erased in Russian mafia hits," Amir said. "It could be related to honor, or to business."

Amir noted that the Israel Police's Serious and International Crimes Unit (SICU) was established after the 1995 murders in order to track mob organizations in Israel that hailed from the countries of the former Soviet Union.

But the Russian mafia division of the SICU has been drastically downsized in recent years, as police have focused on smashing home-grown organized crime.

"We are not immune to this type of criminal activity. It grows wherever it appears," Amir warned.

Dep-Cmdr. (ret.) Dr. Danny Gimshi, head of the Community Safety Research Institute at Rishon Lezion's College of Management, concurred, saying that the Oshrenko homicides resembled a Russian mob hit job.

"This is linked to the fact that in our country, law enforcement is not efficient. We have an ex-prime minister and ex-president facing criminal proceedings. The law is seen as a suggestion," he said.

Gimshi added that growing lawlessness, as indicated by increasing teenage abuse of alcohol and other signs of criminality, were encouraging murderous crimes.

"This is a natural outcome of all these factors, and therefore I am not surprised it happened," Gimshi said.

"Crime organizations in the world, including Russian, Chinese and Columbian, horrify communities. This is a strategy to take control of people and places, and shut down resistance," he added.

Nearly a quarter on Earth are Muslim, study says


Amid widely different estimates of the size of the world's Muslim population, a new demographic study has determined that followers of Islam represent nearly a quarter of the world's current population, with nearly two-thirds of them living in Asia.

The study, released October 7 and conducted by the Washington-based Pew Research Center's Forum on Religion & Public Life, found that 1.57 billion people are Muslims out of an estimated total world population of 6.8 billion.

Estimates of the global Muslim population have ranged from 1 billion to 1.8 billion people, according to Pew, a nonpartisan organization. Islam is the second largest religious tradition after Chris tianity, which is believed to have some 2 billion adherents.

The study, researchers said, is based on what it called "the best available data" for 232 countries and territories, including analyses of 1,500 sources, census reports, demographic studies and general population surveys.

Among the findings:

• A substantial number of Muslims—one-fifth, or more than 300 million—live in countries where Islam is not the majority religion.

• Indonesia, with an estimated Muslim population of 202,867,000—88 percent of its total population—has nearly 13 percent of the world's Muslim population. Pakistan, with 174,082,000 Muslims—96.3 percent of its population—ranked second, with 11.1 percent of the world's Muslim population. India was third, followed by Bangladesh and Egypt.