By Lakhvinder Singh

Recent media reports that China surpassed Japan in the second quarter to become the world’s second largest economy have added further support to what has been predicted by scholars and economists for some time now: that China’s rise to the top is inevitable and might come sooner than expected.

In recent years China has been surpassing one major world economy after the other; such as Germany, France, Great Britain and now Japan. Now the only country which is standing between it and the top slot is the United States.

Many economists are predicting that China will surpass the U.S. by 2030 (if not earlier) to claim the leading position. What will differentiate between today’s biggest economy and China’s future is that while the U.S. is fully developed and thus has very limited scope for further growth, China in 2030 may occupy the No. 1 economic position and yet might still be developing with further higher potential of growth over the next few decades.

It is estimated that in the second half of this century, the Chinese might boast an economy of between $60 trillion to $75 trillion, which is something unheard of in the annals of economic history.

Obviously the effects of this growth are already being felt all over the globe in the economic, political, and military arenas. Today China’s increasing dominance of the global economy’s functions is enforced by its huge possession of foreign exchange reserves, its growing control of international trade and its unquenchable thirst for oil, iron ore, coal and other natural resources.

China is replacing the U.S. as the engine of global growth. It’s becoming active and visible in parts of the world where its presence was very rarely noticed even a decade ago, such as Africa and Latin America. And as a measure of its self-confidence last year, its leader asserted that the dollar must be phased out as the world’s primary trading and reserve currency.

As an indicator of its own internal economic health, China is expected to grow around 10 percent per year in the near future, despite the current economic slowdown, while the biggest economies of the world such as America and the European Union are finding it difficult to make ends meet. Despite China’s slower exports, it was able to introduce a $586 billion stimulus plan for its economy and invest heavily in infrastructure development.

Yet within this rosy picture China also faces some serious challenges on its way to the top. Its failure to develop greater demand for domestic consumption goods and a heavy dependence on exports and foreign direct investment might prove to be China’s Achilles’ heel in the long run.

The country’s banking and financial system are also in dire need of reform. China’s currency policy is facing a serious attack from the U.S. and European Union. It is said that China is keeping its currency artificially low in order to bolster its exports. Both America and the European Union are attributing their huge trade deficits to this unfair currency policy.

China’s trade practices are also provoking serious issues of concern in other quarters. Many Asian and African countries are strongly opposed to the dumping of “cheap and substandard” products in their markets. In the recent past, India has initiated a large number of anti-dumping cases against Chinese firms.

Beijing’s reluctance to play a greater role in the climate change debate is also raising serious concerns among other key nations. According to some estimates, the country has already become the world’s largest emitter of green house gases in the world. Thus, without China’s active participation in environment-related issues, not much progress is expected to be achieved on this front.

Its economic rise is also being reflected in recent foreign policy choices. Its refusal to go along with the international community in sanctions against North Korea for its nuclear program and the sinking of a South Korean naval ship is being seen as a newfound confidence in its ability to stand alone against the pressure of world powers.

China is also adopting a more aggressive approach with other regional countries whom it has boundaries disputes with. The recent Chinese refusal to give a visa to a serving Indian military commander on the pretext of him serving in the Indian state of Jammu and Kashmir has rattled the Indian establishment to the core.

Never in the 63 years since India won its independence has China been so active in the Jammu and Kashmir region as it is now. According to recent media reports more than 11,000 active-duty soldiers are stationed in the Gilgit area in Pakistan, which is ruled by Jammu and Kashmir, on the pretext of constructing a gas pipeline.

China’s ability to resist the temptation to interfere in the internal affairs of neighboring countries with which it has political and boundary disputes might end up as the greatest external foreign policy challenge to China’s policymakers.

China is also becoming more active in Africa. Its willingness to work with oppressive African dictatorships throws an open challenge to the American and European vision of a prosperous Africa governed by democracies that respect human rights and the rule of law, and that embrace free markets.

As newfound confidence in its economic success grows, China is beginning to claim that its unique development model, overseen by a one-party totalitarian state with full control over all aspects of economic, political and social activity is the way to go for all developing countries. Democracies stand warned.

Lakhvinder Singh, senior research fellow at the Institute for Far Eastern Studies in Seoul, is president of the Indo-Korean Policy Forum. He can be reached at kapcenterkyu@yahoo.com.