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AseanAffairs Magazine November - December 2010



China in Spotlight
The emerging role of China in the 21st century is a focal point for conjecture and a certain degree of apprehension in the world outside of China. Is China an ally, a competitor, an adversary or perhaps all three?


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Rajiv Biswas




“With domestic markets stagnant, European firms may wish to travel the New Silk Road to dynamic Asian markets.

   Seven centuries ago, the Silk Road described by Venetian trader Marco Polo in ‘Il Milione’ _ the account of his travels to Cathay _ comprised a series of transport routes overland and by sea from Southern Europe through Central and South Asia through to China. In the 13th Century, China was one of the world’s leading civilizations, and the Silk Road not only opened up flourishing trade between East and West, but also the importation of significant new technology from China that facilitated Europe’s economic development and scientific advance.

More than 700 years later, Europe is beset by structural economic problems, including demographic ageing and rising fiscal burdens of pension and health care provision, amidst fiscal debt crises in a significant number of EU member countries. With domestic growth and market expansion limited, Europe’s focus is again turning to the countries along the Silk Road as the fulcrum of opportunity in the 21st century. Indeed, the economic regions comprising the New Silk Road, including China,

Asean, India, Central Asia and the Middle East, are projected to be the fastest growing regions of the global economy over the next two decades. The markets of the New Silk Road economies therefore offer considerable opportunities for European businesses, in contrast to moderate economic growth at best in Europe.

Mr.Liang Xinjun, Vice Chairman and CEO of the Chinese conglomerate the Fasum Group. Premier jean-Claude Juncker - "Chinas relation with the European Union are burgeoning."

The world economy is currently experiencing a major shift in economic power from West to East, as China and India emerge as new global economic giants. While East Asia’s export-driven growth model during the 1980’s and 1990’s was heavily driven by the strength of demand from the U.S. and Europe, by 2010 the ascendancy of China as the world’s second largest economy has also resulted in Chinese demand becoming a key driver of exports from other Asian countries.

Over the next decade, the Asia-Pacific region is projected to remain the fastestgrowing region of the global economy,

with both China and India growing at an average rate of around 8 per cent per year. Within 15 years, by the year 2025, Chinese nominal GDP is expected to exceed that of the United States, making China the world’s largest economy, broadly similar in size to the combined GDP of the European Union. Indian nominal GDP is projected to exceed that of Japan by 2025, and the size of the Indian economy is also expected to be larger than any individual EU economy.
The importance of the New Silk Road to the European economy is demonstrated by the rapid growth in EU merchandise exports to China, which tripled between 2000 and 2009. In terms of actual values, total EU merchandise exports increased by 56 billion euro between 2000 and 2009, rising from 26 billion euro in 2000 to 82 billion euro in 2009. With the value of service exports from the EU to China having reached 18.5 billion euro in 2009, total EU exports to China amounted to around 100 billion euro in 2009. As the global recovery strengthened in the first half of 2010, total EU exports to China rose by 43 per cent over that of a year ago.

Starbucks has been a spectacular success in China.


Source : IHS Global Insight.

With the size of Chinese GDP expected to continue to expand rapidly over the next two decades, the implications for European trade and investment are far-reaching. Furthermore, there is a major rebalancing taking place in the structure of the Chinese economy, with a significant shift away from the traditional growth engines of exports and investment, towards domestic demanddriven growth. Rapid growth in wages is expected to support strong medium-term expansion in consumer demand, helping to boost the share of consumption in GDP over the long term.

Mr Liang Xinjun, Vice Chairman and CEO of the Fosun Group, a leading Chinese conglomerate, expects the Chinese consumer market to grow very strongly over the coming decades. Speaking at the Horasis Global China Business Meeting in November, he projected that “within 10 years, China will become the world’s largest consumer market. If China’s GDP grows at between 7 and 8 percent per year over the next five to 10 years, domestic demand will grow at 15 percent per year, with demand for branded goods growing even more quickly, at around 20 percent per year. Western multinationals can no longer operate effectively without a strategic focus on the Chinese market.” However,

other Asian growth engines are also rising in importance, notably India, which within a decade is projected to become an economy roughly the size of China’s economy today. Asean is also expected to become one of the world’s leading growth engines, due to the rapid growth of Indonesia and Vietnam, whose consumer markets are currently growing strongly.......................


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