China revisits the world

I just made my 20th visit to China. China will not change the modern world, it already has. They have taken more than a million people a month out of extreme poverty over the past 20 years, lifting hundreds of millions out of poverty, and now generate wealth, jobs and growth everywhere. Over a thousand new vehicles are registered every hour! Her new airport at Beijing will welcome, efficiently, over a million passengers a week.

From being self-sufficient in energy 20 years ago, she's now the second biggest importer. The increase in her energy demands over the past five years equals Japan's total energy consumption. Wages in coastal China exceed wages in The Philippines and Indonesia. Salaries are up 13 per cent last year in the Pearl River delta. New labour laws have raised wages and awareness of Chinese workers. During the past year, one thousand shoe factories have closed, and the Hong Kong Industry Federation expects up to 7,000 of Hong Kong-owned factories to close this year. Many have moved inland in search of lower wages, some are moving to Africa and Vietnam.

This shows the circular nature of wealth creation caused by globalisation; Japan in the 1950's, then Korea, Taiwan, now China and India; and as incomes grow, new opportunities open for poor countries. It becomes their turn. Africa missed out on globalisation but is now catching up. There are now a million Chinese working in Africa.

African exports to China have increased by 40 per cent since 2002. Of the top 20 fastest growing economies in 2006, five are in Africa, three in the top 10. As late as 1990, China's GDP was $390 billion (Dh1.4 trillion), and Africa $405 billion, now China's economy is about five times bigger. The largest-ever investment in Africa has been concluded by China into a South African bank.

Now China is integrated into the world economy, she is facing the kind of threats to her reputation that all major mature nations face. Pressure is mounting about China's investments and arms sales to Sudan. The appalling crisis in Darfur now needs China's intervention and good offices to put pressure on the government. And they are beginning to.

Seeking change

Senior politicians in the US and UK have publicly acknowledged that China is now working behind the scenes to nudge change. The Olympics in Beijing is an opportunity for all sorts of causes to be raised, and China, like any other country, must respond. This is unfamiliar territory for China. They never had to care about global opinion before. Now they do. Some of the criticism is unfair but that's the price of global integration. Reputation is everything.

When the grandmothers of America get scared about lead in toys they will not purchase from China. That's economic democracy; choice. All this is splendid, it's a better world when we rely on each other for growth and success. Old-fashioned, discredited protectionist moods and methods are never far away. Protectionism is raising its ugly reactionary head again in the US election campaign, and it's getting some traction.

If it's this bad with five per cent unemployment, just imagine what it will be like with 10 per cent unemployment. A new target is the so-called sovereign funds. Most of these are state-owned funds, or state-influenced funds. It's not just the resource-rich nations, it's state-owned pension funds, and the welcome fact that after the Asian crisis, most governments have prudently built up financial reserves.

More mature economies, Singapore, Norway, Australia and New Zealand, with ageing populations, now have investment funds managed and influenced by governments. It's good, but poses new challenges.

We have learnt one thing - protectionism makes us all poorer, investment is a good thing. But there needs to be predictable, transparent rules.

Mike Moore is a former prime minister of New Zealand and a former director-general of the World Trade Organisation.