The Emergence of China: Opportunities and Challenges for Latin American
China’s economy has expanded dramatically since 1978, with annual growth of gross domestic product (GDP) averaging more than 9 percent. The Latin America and Caribbean region still surpasses China in absolute economic size, but the gap has been closing rapidly since the 1970s. China’s performance in capital formation has also been strong, fed by impressive rates of domestic savings estimated at about 43 percent of GDP. The country’s annual inflation rate averaged just 1 percent between 1996 and 2003, a period punctuated by episodes of slight deflation despite soaring output. Externally, an expanding share of international trade has been one of the most notable aspects of China’s mounting significance in the global economy. Chinese exports grew by an average 5.7 percent in the 1980s, 12.4 percent in the 1990s, and 20.3 percent between 2000 and 2003. Yet since China’s imports have also grown rapidly, large trade surpluses are not being run up like those accumulated by Japan during its Post war economic expansion. By 2003 there was a seven-fold gap between Chinese and world export growth rates. FDI flows to China also have risen dramatically and now stand at more than $1 billion a week, while external debt is modest at the equivalent of 40 percent of exports and 14 percent of GDP. As a result of this remarkable performance, China is no longer a low-income developing country. It has lifted more than 400 million people out of poverty since the late 1970s.