Although Japan today remains the second largest economy in the world after the United States, China has made significant economic progress since its entry into the World Trade Organization (WTO) in December 2001. For the past decade, China has dominated at low-cost manufacturing. So, it is no surprise that this Asian Tiger has often been referred to as “the world’s largest factory or workshop.”
China’s economic advance started when President Deng Xiaoping led China into free-market economies and opened its trade doors to the world in 1997, practically shuttering its communist economics system. This daring and visionary move by President Deng changed China’s fate and destiny. He helped transform an emerging market into one of the world’s most powerful economic players. In fact, he set the stage for China to become a global market leader. And now, some predict that the inevitable is imminent: China might soon overtake the United States as the key driver of the global economy, a position the United States has held since the end of World War II.
If we take a closer look at the statistics, China, which accounts for approximately one-fifth of the world’s population, is prepared for better economic times. China has already overtaken the United States as the country with the world’s largest number of Internet users. For the past three years, China has also been the world’s largest exporter of information and communications technology (ICT). It now has the same number of mobile phone users (500 million) as the whole of Europe.3 By the year 2015, China’s research scientists and engineers might outnumber those of any other country. By the year 2020, it aims to annually spend a larger share of its GDP on research and development (R&D) than the European Union.4
With such dramatic and rapid rise in economic growth, comes a heavy price—rapid urbanization. For the world’s most populous country with 1.3 billion people, the statistics are staggering. China’s cities are set to add 325 million more people, including about 230 million migrants. Based on the current trend, the country’s urban population will reach 926 million by the year 2025 and top 1 billion by the year 2030.
Let the data speak for itself: 221 of China’s cities will have more than 1 million residents (compared to Europe, which has 35 cities today). In addition, 5 billion square meters of road will be paved, 170 mass-transit systems could be built, and 40 billion square meters of floor space will be built in 5 billion buildings. (Of those new buildings, 50,000 could be skyscrapers, the equivalent of ten New York Cities). And, by 2025, the GDP will have multiplied by five times, and the urban economy will generate more than 90 percent of China’s GDP.5
That is one mammoth record to match.
The Fortune 500 multinational companies that currently operate in China had been conducting business in China for a long time when they first set foot in that country. Further, since joining the WTO, China has been flexible in its rules and procedures for foreign companies. These multinational companies have grown and expanded their businesses from major cities to smaller towns or cities within China, reaching out to serve the huge domestic markets, which comprise small- to medium-sized businesses and middle-class consumers.
Today, these multinational companies are reported to be more profitable in China than their other operations in other parts of the world. China, too, benefits from these multinational companies: As these companies transact with their local counterparts, a constant transfer occurs of knowledge, global standards, best practices, and innovative ideas and technologies. With the lessons learned from these multinational companies, China appears ready to globalize its knowledge-based economy.