China’s skyscraper boom buoys global industry

Posted by | Posted on 10-11-2011

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China’s skyscraper boom buoys global industry

BEIJING – The 121-story Shanghai Tower is more than China’s next record-setting building: It’s an economic lifeline for the elite club of skyscraper builders.

Financial gloom has derailed plans for new towers in Chicago, Moscow, Dubai and other cities. But in China, work on the 2,074-foot (632-meter) Shanghai Tower, due to be completed in 2014, and dozens of other tall buildings is rushing ahead, powered by a buoyant economy and providing a steady stream of work to architects and engineers.

The U.S. high-rise market is “pretty much dead,” said Dan Winey, a managing director for Gensler, the Shanghai Tower’s San Francisco-based architects. “For us, China in the next 10 to 15 years is going to be a huge market.”

China has six of the world’s 15 tallest buildings – compared with three in the United States, the skyscraper’s birthplace – and is constructing more at a furious pace, defying worries about a possible real estate boom and bust. It is on track to pass the U.S. as the country with the most buildings among the 100 tallest by a wide margin.

“There are cities in China that most Western people have never heard of that have bigger populations and more tall buildings than half the prominent cities in the U.S.,” said Antony Wood, executive director of the Council on Tall Buildings and Urban Habitat at the Illinois Institute of Technology in Chicago.

China is leading a wave of skyscraper building in developing countries that is shifting the field’s center of gravity away from the United States and Europe.

India, Brazil, Saudi Arabia and Indonesia have ultra-tall towers under construction or on the drawing board. In the Gulf, Doha in Qatar and Dubai – site of the current record holder, the 163-story Burj Khalifa – each has three buildings among the 20 tallest under construction, though work on all but one of those has been suspended.

The shift is so drastic that North America’s share of the 100 tallest buildings will fall from 80 percent in 1990 to just 18 percent by 2012, according to Wood. He said by then, 45 of the tallest will be in Asia, with 34 of those in China alone.

“So 34 percent of the 100 tallest buildings will be in a single country. That has only happened once before, and that was with the USA,” he said.

In China, skyscrapers are going up in obscure locales such as Wenzhou, Wuhan and Jiangyin, a boomtown north of Shanghai. It is building a 72-story, 1,076-foot (328-meter) hotel-and-apartment tower that will be taller than Manhattan’s Chrysler Building.

China’s edifice complex is driven by a mix of demand for space in a crowded country with economic growth forecast at 10 percent this year and local leaders who want architectural eye candy to promote their cities as commercial centers.

Dozens of midsize Chinese cities are building new business districts to replace cramped downtowns. They look to the model of Shanghai’s skyscraper-packed Pudong district – China’s Wall Street – created in the 1990s on reclaimed industrial land.

“Governments are encouraging these iconic buildings in order to give a very clear message to the outside world: Please pay attention to our city,” said Dennis Poon, managing principal of Thornton Tomasetti, the Shanghai Tower’s structural engineers. The New York-based firm also is working on the 115-story Ping An International Finance Center in Shenzhen, near Hong Kong, and other Chinese projects.

China has four of the 10 tallest buildings under construction, versus two for the United States – and work on one of those, the 2,000-foot (610-meter) Chicago Spire, has stopped.

The Shanghai Tower will be China’s tallest office tower, surpassing the neighboring Shanghai World Financial Center in Pudong. The 2-year-old WFC passed the Jinmao Tower, also in Pudong, for the title.

China accounts for 65 percent of Gensler’s worldwide revenues from projects that involve buildings 35 to 40 stories and above, according to Winey.

The firm is working on some 50 projects in China that total 80 million square feet (8 million square meters), the equivalent of San Francisco’s entire stock of commercial office space, he said. China revenues are rising by 30 to 35 percent a year and its staff of 140 people in offices in Beijing and Shanghai should expand to 500 in the next seven years.

The boom has drawn a Who’s Who of star architects and given Chinese firms their first shot at designing a skyscraper.

Shenzhen’s Ping An tower was designed by Kohn Pedersen Fox; the New York firm’s other projects include the 116-story East Tower of the Chow Tai Fook Center in Guangzhou, also near Hong Kong. Chicago-based Skidmore Owings & Merrill designed Beijing’s tallest building, the 75-story China World Tower III, and the 76-story Tianjin World Financial Center in Tianjin east of Beijing, due to be completed next year. Jiangyin’s Hanging Village of Huaxi was designed by China’s A+E Design.

Tianjin, a port and oil-refining center with ambitions to be a finance and tech hub, is building four towers of at least 75 stories. One of them, the Goldin Finance 117, will be 117 stories and nearly 2,000 feet (600 meters) tall.

Instead of Western-style single-use office or apartment towers, many developers diversify their revenue sources by making buildings a mix of hotel and office space, with a shopping mall in the base and luxury apartments at the top.

The new space is hitting the market just as Beijing tries to cool a boom in construction of luxury housing and shopping malls. Regulators warn that a supply glut could leave lenders with unpaid loans if developers default.

But demand for high-end office space is so strong that the skyscraper market should face no such problems, said Danny Ma, director of China research for real estate consulting firm CB Richard Ellis. He said the new buildings should fill up quickly because many are the first in their cities to offer high-quality facilities required by foreign and major Chinese companies that are expanding there.

“More and more tenants are keen to move to such buildings,” Ma said. He said developers are signing up tenants in advance for 50 to 60 percent of the space in new projects, enough in many cases to make them profitable.

China is helping to propel development of skyscraper design and urban planning as developers face government pressure to make buildings environmentally friendly and integrate them into busy cities.

The Shanghai Tower will have a double-layer glass exterior to insulate it and cut heating and cooling costs, an advanced feature that might be rejected as too costly in the U.S. or other Western markets, Winey said.

“You can do a lot more experimentation here,” he said. “It’s an amazing place to be, because you can do things here that you can’t do anywhere else in the world.”

By JOE McDONALD, AP Business Writer

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Age of America Nears End

Posted by | Posted on 27-04-2011

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IMF Bombshell: Age of America Nears End

The International Monetary Fund has just dropped a bombshell, and nobody noticed.

For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.

And it’s a lot closer than you may think.

According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 – just five years from now.

Put that in your calendar.

It provides a painful context for the budget wrangling taking place in Washington right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.

According to the IMF forecast, which was quietly posted on the Fund’s website just two weeks ago, whoever is elected U.S. president next year – Obama? Mitt Romney? Donald Trump? – will be the last to preside over the world’s largest economy.

Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.

But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.

That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.

The Comparison That Really Matters

In addition to comparing the two countries based on exchange rates, the IMF analysis also looked to the true, real-terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.

Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.

Just 10 years ago, the U.S. economy was three times the size of China’s.

Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.

This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”

We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.

And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.

Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers.

“The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”

The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies – from South America to China and elsewhere.

This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.

“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”

The next chapter of the story is just beginning.

U.S. Spending Spree Won’t Work

What the rise of China means for defense, and international affairs, has barely been touched on. The U.S. is now spending gigantic sums – from a beleaguered economy – to try to maintain its place in the sun.

It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.

Equally to the point, here is what this means economically, and for investors.

Some years ago I was having lunch with the smartest investor I know, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts – whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.

The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.

No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag … not so much.

The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.

Updated With IMF Reaction

The International Monetary Fund has responded to my article.

In a statement sent to MarketWatch, the IMF confirmed the report, but challenged my interpretation of the data. Comparing the U.S. and Chinese economies using “purchase-power-parity,” it argued, “is not the most appropriate measure” because PPP price levels are influenced by nontraded services, which are more relevant domestically than globally.”

The IMF added that it prefers to compare economies using market exchange rates, and that under this comparison the U.S. “is currently 130% bigger than China, and will still be 70% larger by 2016.”

My take?

The IMF is entitled to make its case. But its argument raises more questions than it answers.

First, no one measure is perfect. Everybody knows that.

But that’s also true of the GDP figures themselves. Hurricane Katrina, for example, added to the U.S. GDP, because it stimulated a lot of economic activity – like providing emergency relief, and rebuilding homes. Is there anyone who seriously thinks Katrina was a net positive for the United States? All statistics need caveats.

Second, comparing economies using simple exchange rates, as the IMF suggests, raises huge problems.

Currency markets fluctuate. They represent international money flows, not real output.

The U.S. dollar has fallen nearly 10% against the euro so far this year. Does anyone suggest that the real size of the U.S. economy has shrunk by 10% in comparison with Europe over that period? The idea is absurd.

China actively suppresses the renminbi on the currency markets through massive dollar purchases. As a result the renminbi is deeply undervalued on the foreign-exchange markets. Just comparing the economies on their exchange rates misses that altogether.

Purchasing power parity is not a perfect measure. None exists. But it measures the output of economies in terms of real goods and services, not just paper money. That’s why it’s widely used to compare economies. The IMF publishes PPP data. So does the OECD. Many economists rely on them.

Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.

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Despite China’s might, US factories maintain edge

Posted by | Posted on 21-02-2011

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Despite China’s might, US factories maintain edge

WASHINGTON – U.S. factories are closing. American manufacturing jobs are reappearing overseas. China’s industrial might is growing each year.

And it might seem as if the United States doesn’t make world-class goods as well as some other nations.

“There’s no reason Europe or China should have the fastest trains, or the new factories that manufacture clean energy products,” President Barack Obama said in his State of the Union address last week.

Yet America remains by far the No. 1 manufacturing country. It out-produces No. 2 China by more than 40 percent. U.S. manufacturers cranked out nearly $1.7 trillion in goods in 2009, according to the United Nations.

The story of American factories essentially boils down to this: They’ve managed to make more goods with fewer workers.

The United States has lost nearly 8 million factory jobs since manufacturing employment peaked at 19.6 million in mid-1979. U.S. manufacturers have ranked near the top of world rankings in productivity gains over the past three decades.

That higher productivity has meant a leaner manufacturing force that’s capitalized on efficiency.

“You can add more capability, but it doesn’t mean you necessarily have to hire hundreds of people,” says James Vitak, a spokesman for specialty chemical maker Ashland Inc.

The industry’s fortunes are brightening enough that U.S. factories are finally adding jobs after years of shrinking their payrolls. Not a lot. But even a slight increase shows manufacturers are growing more confident. They added 136,000 workers last year – the first net increase since 1997.

What’s changed is that U.S. manufacturers have abandoned products with thin profit margins, like consumer electronics, toys and shoes. They’ve ceded that sector to China, Indonesia and other emerging nations with low labor costs.

Instead, American factories have seized upon complex and expensive goods requiring specialized labor: industrial lathes, computer chips, fighter jets, health care products.

Consider Greatbatch Inc., which makes orthopedics and other medical goods. The company is expanding its manufacturing operations near Fort Wayne, Ind. Greatbatch wanted to take advantage of a specialized work force in northeastern Indiana, a hub of medical research and manufacturing.

“When you’re talking about medical devices, failure is not an option,” CEO Thomas Hook says. “It’s a zero-mistake environment. These products are customized and high-tech. They go into patients to keep them alive.”

Hook says the United States offers advantages over poorer, low-wage countries: reliable supplies of electricity and water, decent roads. And some localities support businesses by providing infrastructure and vocational training for potential hires.

Centerline Machining & Grinding in Hobart, Wis., which makes custom parts for manufacturers in the paper industry, plans to add to its staff of 26. But it’s struggling to find the skilled tradesmen it needs for jobs paying $18 to $25 an hour.

CEO Sara Dietzen laments that local vocational schools cut back training courses in recent years, having concluded that the future for manufacturing was dim. Not from her view it isn’t. For her company, output is all about speed.

“Our average customer wants a turnaround in less than three weeks,” Dietzen says. “You’re not going to get that in China.”

Still, economist Cliff Waldman of the industry research group Manufacturers Alliance/MAPI doubts that U.S. factories will continue to expand their payrolls in the long run. Manufacturing, he says, is “not a job creator for the U.S., basically.”

Global competition will always force factory managers to try to replace expensive workers with machines or with low-wage labor overseas, Waldman says.

Mark Perry, a visiting scholar at the conservative American Enterprise Institute, likens the loss of manufacturing jobs to the exodus of workers from farms between the 19th and 20th centuries. If that migration hadn’t happened, Perry says, “we’d still have millions of people working in agriculture. Now, we can employ fewer people in factories.”

But the transition can be painful, he concedes.

The U.S. remains No. 1 in global manufacturing, accounting for 18 percent of global manufacturing output in 2008. But China is catching up. Its share of manufacturing output jumped from about 6 percent in 1998 to 15 percent in 2008.

Critics have a ready explanation for that: unfair competition.

Robert Scott of the left-leaning Economic Policy Institute says China is cheating in world markets – keeping its currency artificially low to make Chinese products less expensive overseas and unfairly subsidizing its exporters.

Scott and other critics want to see the Obama administration support U.S. manufacturers by pressuring Beijing to drop the subsidies and let its currency rise freely. A higher-valued Chinese currency would make U.S. exports cheaper for Chinese consumers.

Centerline CEO Dietzen says she isn’t fazed by Chinese manufacturing. Some of her customers have placed orders with Chinese companies, she says, only to return, frustrated, to her company.

Chinese factories want mainly big orders. And they demand lots of time to fill them.

Dietzen says her clients are “finding when they get their parts back from China, they’re not always what they want. So we end up doing the work anyway.”

“A common misperception,” Greatbatch CEO Hook says, is that the United States doesn’t make anything anymore.

The reality is rather different.

“We need a highly skilled work force,” Hook says. “So it’s very advantageous to be in a country like the United States where people are educated and ready to be hired.”

By PAUL WISEMAN, AP Economics Writer

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Seven Flaws in China’s Growth Model

Posted by | Posted on 28-01-2011

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Seven Flaws in China’s Growth Model

Short term, China will keep growing rapidly, adding to demand and boosting the global economy. Long term, the picture’s not so pretty.

China’s economy is slowing, but only a little. The July industrial production numbers announced by the country’s National Bureau of Statistics on Aug. 11 were weaker than expected. That raised fears that one of the engines of global growth was about to seize up. In fact, the slight slowdown is intentional, the result of moves by Beijing to prevent overheating. China can and will change course if the need arises. We still expect it to grow about 10% this year, a figure that will make most of the world envious.

Still, over the next few years, Chinese growth has to moderate somewhat. Double-digit annual GDP gains in the past were relatively easy because the economy was growing from a small base. Those kinds of gains will be harder to achieve now that China is the world’s second largest economy, about one-third the size of the U.S. But China’s lightning expansion also masks a host of serious structural flaws. Fixing them will take major reforms that, so far, Beijing has proved unwilling to make — in no small part because they would undermine the authority of the ruling Communist Party.

Excessive Capital Investment

Beijing rewards provincial and local government officials with promotions if they manage their regions well. For decades, the chief measure of progress was success in providing jobs for a rapidly growing urban workforce. That usually meant building factories or adding infrastructure, whether needed or not. Such overcapacity leads to waste of scarce resources, deflation and dumping of excess production abroad.

Financial Mismanagement

Local officials force state-owned banks to finance that construction at next-to-nothing rates, with no regard for borrowers’ suitability. Inevitably, nonperforming loans pile up on the banks’ balance sheets. Beijing already recapitalized the four largest state banks once, forcing ordinary depositors to foot the bill, which hurt consumption. Now bad loans are once again on the rise, a result of the $586-billion stimulus China poured through banks last year. Though Beijing could manage another bailout, it certainly can’t go through this cycle endlessly.

Flawed Education

Chinese colleges graduate many times the number of engineers and scientists that American universities produce, but such statistics are misleading. To meet the quotas for graduates set by Beijing, academic programs dilute their standards. They further inflate their count by counting as engineering students those studying to become mechanics or industrial technicians. The result, according to a pioneering study led by Duke University professors Gary Gereffi and Vivek Wadhwa, is that many of these graduates fall far short of the standards imposed by U.S. colleges and universities. When they graduate, many are unable to find work in their professions.

Stifled Innovation

Those engineers and scientists who do measure up — the cream of Chinese universities or those who study overseas and return home — often have little freedom to explore. If they work for state-owned firms or universities, Beijing dictates the direction of research and development. Many gravitate to the more open atmosphere at private firms, but these companies can’t get loans to grow because state enterprises gobble up the capital. Beijing aims to compensate by forcing multinationals to transfer advanced technology as the cost of doing business in China, but foreign firms are fighting back hard.

Environmental Degradation

Water pollution and water shortages pose the most serious problems. They cause health ailments, damage agriculture, jam up hydroelectric dams, interfere with manufacturing and limit urbanization. As aquifers dry up, soil erodes, turning an area the size of Connecticut to desert every year. The resulting dust storms add to the country’s already horrendous air pollution. Beijing’s preferred solution to the problem is a massive south-to-north river diversion project. Odds are, that will make matters worse, draining water from already overtaxed southern supplies.

Corruption

One of the major reasons Beijing has such a hard time dealing with all the problems mentioned above is that so many individuals have a vested interest in keeping things exactly as they are. Communist Party officials pay for their advancement, then aim to earn back their investment. Local governments seize houses and land, sell it to developers with little compensation for those displaced, then take kickbacks from the construction companies. Academics provide kickbacks to the party in exchange for research funding. U.S. companies operating in China suffer as well. “When U.S companies hire for research and development there, there’s a lot of pressure to put Communist Party members in key positions,” says Wadhwa.

Beijing does make examples of particularly corrupt officials and business leaders, sometimes even executing the offenders. But the problem of corruption is endemic, says Liao Ran, a China specialist with Transparency International. “Generally speaking, the cost of corruption amounts to about 10% to 13% of annual GDP,” he says. In absolute terms, that’s a loss of $500 billion to $700 billion per year.

And Demographics

As the generation of the Cultural Revolution retires, the burden of their care falls heavily on the smaller generation of the one-child policy. “The Chinese population is simply growing older faster than it’s getting richer,” says Peter Navarro, a professor of economics and public policy at the University of California at Irvine. As fewer workers support more retirees, competitiveness will suffer. For an illustration of what this could mean, China need look no farther than Japan.

by Andrew C. Schneider, Associate Editor, The Kiplinger Letter

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China Passes Japan as Second-Largest Economy

Posted by | Posted on 19-08-2010

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SHANGHAI – After three decades of spectacular growth, China passed Japan in the second quarter to become the world’s second-largest economy behind the United States, according to government figures released early Monday.

The milestone, though anticipated for some time, is the most striking evidence yet that China’s ascendance is for real and that the rest of the world will have to reckon with a new economic superpower.

The recognition came early Monday, when Tokyo said that Japan’s economy was valued at about $1.28 trillion in the second quarter, slightly below China’s $1.33 trillion. Japan’s economy grew 0.4 percent in the quarter, Tokyo said, substantially less than forecast. That weakness suggests that China’s economy will race past Japan’s for the full year.

Experts say unseating Japan – and in recent years passing Germany, France and Great Britain – underscores China’s growing clout and bolsters forecasts that China will pass the United States as the world’s biggest economy as early as 2030. America’s gross domestic product was about $14 trillion in 2009.

“This has enormous significance,” said Nicholas R. Lardy, an economist at the Peterson Institute for International Economics. “It reconfirms what’s been happening for the better part of a decade: China has been eclipsing Japan economically. For everyone in China’s region, they’re now the biggest trading partner rather than the U.S. or Japan.”

For Japan, whose economy has been stagnating for more than a decade, the figures reflect a decline in economic and political power. Japan has had the world’s second-largest economy for much of the last four decades, according to the World Bank. And during the 1980s, there was even talk about Japan’s economy some day overtaking that of the United States.

But while Japan’s economy is mature and its population quickly aging, China is in the throes of urbanization and is far from developed, analysts say, meaning it has a much lower standard of living, as well as a lot more room to grow. Just five years ago, China’s gross domestic product was about $2.3 trillion, about half of Japan’s.

This country has roughly the same land mass as the United States, but it is burdened with a fifth of the world’s population and insufficient resources.

Its per capita income is more on a par with those of impoverished nations like Algeria, El Salvador and Albania – which, along with China, are close to $3,600 – than that of the United States, where it is about $46,000.

Yet there is little disputing that under the direction of the Communist Party, China has begun to reshape the way the global economy functions by virtue of its growing dominance of trade, its huge hoard of foreign exchange reserves and United States government debt and its voracious appetite for oil, coal, iron ore and other natural resources.

China is already a major driver of global growth. The country’s leaders have grown more confident on the international stage and have begun to assert greater influence in Asia, Africa and Latin America, with things like special trade agreements and multibillion dollar resource deals.

“They’re exerting a lot of influence on the global economy and becoming dominant in Asia,” said Eswar S. Prasad, a professor of trade policy at Cornell and former head of the International Monetary Fund’s China division. “A lot of other economies in the region are essentially riding on China’s coat tails, and this is remarkable for an economy with a low per capita income.”

In Japan, the mood was one of resignation. Though increasingly eclipsed by Beijing on the world stage, Japan has benefited from a booming China, initially by businesses moving production there to take advantage of lower wages and, as local incomes have risen, by tapping a large and increasingly lucrative market for Japanese goods.

Beijing is also beginning to shape global dialogues on a range of issues, analysts said; for instance, last year it asserted that the dollar must be phased out as the world’s primary reserve currency.

And while the United States and the European Union are struggling to grow in the wake of the worst economic crisis in decades, China has continued to climb up the economic league tables by investing heavily in infrastructure and backing a $586 billion stimulus plan.

This year, although growth has begun to moderate a bit, China’s economy is forecast to expand about 10 percent – continuing a remarkable three-decade streak of double-digit growth.

“This is just the beginning,” said Wang Tao, an economist at UBS in Beijing. “China is still a developing country. So it has a lot of room to grow. And China has the biggest impact on commodity prices – in Russia, India, Australia and Latin America.”

There are huge challenges ahead, though. Economists say that China’s economy is too heavily dependent on exports and investment and that it needs to encourage greater domestic consumption – something China has struggled to do.

The country’s largely state-run banks have recently been criticized for lending far too aggressively in the last year while shifting some loans off their balance sheet to disguise lending and evade rules meant to curtail lending growth.

China is also locked in a fierce debate over its currency policy, with the United States, European Union and others accusing Beijing of keeping the Chinese currency, the renminbi, artificially low to bolster exports – leading to huge trade surpluses for China but major bilateral trade deficits for the United States and the European Union. China says that its currency is not substantially undervalued and that it is moving ahead with currency reform.

Regardless, China’s rapid growth suggests that it will continue to compete fiercely with the United States and Europe for natural resources but also offer big opportunities for companies eager to tap its market.

Although its economy is still only one-third the size of the American economy, China passed the United States last year to become the world’s largest market for passenger vehicles. China also passed Germany last year to become the world’s biggest exporter.

Global companies like Caterpillar, General Electric, General Motors and Siemens – as well as scores of others – are making a more aggressive push into China, in some cases moving research and development centers here.

Some analysts, though, say that while China is eager to assert itself as a financial and economic power – and to push its state companies to “go global” – it is reluctant to play a greater role in the debate over climate change or how to slow the growth of greenhouse gases.

China passed the United States in 2006 to become the world’s largest emitter of greenhouse gases, which scientists link to global warming. But China also has an ambitious program to cut the energy it uses for each unit of economic output by 20 percent by the end of 2010, compared to 2006.

Assessing what China’s newfound clout means, though, is complicated. While the country is still relatively poor per capita, it has an authoritarian government that is capable of taking decisive action – to stimulate the economy, build new projects and invest in specific industries.

That, Mr. Lardy at the Peterson Institute said, gives the country unusual power. “China is already the primary determiner of the price of virtually every major commodity,” he said. “And the Chinese government can be much more decisive in allocating resources in a way that other governments of this level of per capita income cannot.”

The New York Times

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