In Theory: No halting the dragon's march

Five years ago, China outshined the UK to become the fourth largest global economy, after occupying the fifth place for many years. Last year, the Chinese economy topped Germany to take the third position after the US and Japan.

Preliminary estimations indicate that China will outperform Japan economically in 2010 to take second place after the US, five years before previous estimates, which predicted this would happen in 2015.

The high annual growth rates of 10 per cent achieved by the Chinese economy in the past two decades contributed to bringing about this leap at a time when the Japanese economy remained almost stationary due to years of stagnation.

If China continues to achieve high growth rates over the next two decades, as expected, it will end the US economy's 60-year reign at the top in terms of economic growth.

This is expected to happen in 2040, or even before, if the US economy failed to accelerate growth rates and overcome its structural difficulties.

This year, China emerged as the leading car market in the world, overcoming the US market for the first time. China's approaches were not limited to its attempts to turn its economy into the largest global economy within the next 30 years.

It supported this approach with strategic plans, which included extensive investment in exploration and development of natural resources, including oil and gas, in various parts of the world, especially Africa.

Preparation

It seems that China has started preparing for the day on which it will become the world's leading economy. Beijing also knows that this cannot be achieved without securing sufficient energy supplies to avoid being a subordinate to other global competitors.

Hence, we can see the huge investments in the oil and gas sector by PetroChina in Asia, Africa and South America, which puts it in direct competition with well-established international petroleum companies.

China has received a huge response from developing countries that have abundant hydrocarbon resources since PetroChina offers better conditions with regard to oil concessions.

Better deal

China also offers a better deal in terms of the costs involved in setting up installations for oil production, transport and export operations compared to the expensive European companies. This helps developing countries save huge amounts of money by reducing production and export costs.

On the other hand, one must note that traditional oil countries are keen to have joint investments in Chinese markets. Many oil refineries and petrochemical industries have been set up in China with contributions from Gulf and foreign capital.

As for poor developing countries — such as in Africa — which have no financial capabilities to develop their own rich natural resources, the China connection is beneficial.

China has decided to invest $10 billion in Africa over the next three years.

The decision was made at the Forum on China-Africa Cooperation, which took place in Sharm Al Shaikh recently.

This decision will help develop several infrastructure facilities and reliable sources of natural wealth.

In fact, expectations of economists vary on the ability of China to sideline the US as the world's leading economy, and there is still a continuous controversy over calculating the differences between the two economies and their growth rates.

Yet, the Chinese strategic vision clearly reflects China's determination to reach this target and its utmost efforts to do so in the shortest possible time.

Regional equations

When this transformation happens, many international and regional equations will change, which requires all countries and economic powers to reconsider their calculations.

For example, China sidelined the US as Japan's trade partner in the past few years, which resulted in Tokyo re-evaluating its foreign relations with Beijing, including loosening tensions resulting from the heavy legacy of the Second World War.

If the course of events continue in this direction, a new map of international alliances will be drawn in the years to come, to cope with the new economic powerhouses in the world.

Dr Mohammad Al Asoomi is a UAE economic expert.