Chinese economy set to pass Japan’s

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But Rudd also displayed Australia’s independence from Beijing by talking about human rights, Tibet and China’s Muslim minorities — issues Chinese leaders want other countries to keep quiet about. And Australia affirmed its longtime security alliance with Washington — a counterweight to China’s growing might. Rudd’s successor, Julia Gillard, has given no sign of a major change of direction.

In the long historical view, China’s 21st century rise is a return to the status it held for most of the past 2,000 years as “Zhong Hua,” or the Central Brightness, East Asia’s economic and military giant and a beacon of technology and elite culture to societies from Vietnam to Korea to Japan.

China’s was the biggest economy, with its workshops and textile mills accounting for up to one-third of global manufacturing. But it went into steep decline in the 19th century as its rulers resisted mimicking Japan’s embrace of Western technology. By the 1930s, China produced just a few percent of global factory output.

After a civil war, communist takeover and political upheaval, free-enterprise reforms pioneered by leader Deng Xiaoping opened the door for hundreds of millions of Chinese to work their way out of poverty.

Since those reforms began in 1979, China has grown into the world’s low-cost factory, its biggest exporter and producer of half its steel. It wants to evolve beyond cheap manufacturing and is trying to build up technology industries but has had little success so far.

Last year, the World Bank ranked China 124th among economies in per capita income, behind Latin America and some African nations, while Japan was No. 32. The United States was 17th.

Yet already, China’s consumers are so avidly courted by global companies that products from autos to home appliances destined for sale worldwide are designed with their tastes in mind. This year, French luxury goods maker Hermes Group unveiled a brand, Shang Xia, to be designed specifically for Chinese customers.

Unlike Japan, which renounced aggressive force after its World War II defeat, Beijing sees itself as Asia’s rightful military leader. It has openly possessed nuclear weapons since the 1960s and is spending heavily to build up the Communist Party’s military arm, the 2.5 million-soldier People’s Liberation Army.

Beijing’s military outlays are the world’s second-highest and have tripled since 2000 to an estimated $100 billion last year, though well behind Washington’s $617 billion, according to the Stockholm International Peace Research Institute.

China’s demand for oil, iron ore and other raw materials is pumping money into developing economies as far-flung as Angola and Kazakhstan that supply them. Chinese companies are making inroads into Africa in search of resources and markets.

“Now, Africa has an alternative development model,” said Derek Scissors, a Heritage Foundation scholar in Washington. Instead of Western investment with environmental or other strings attached, Scissors said, “they now see the Chinese as an alternative: ‘We don’t want to deal with you. We’ll get some Chinese state-owned company to put $1.5 billion into this mining project.’ “

Chinese pressure helped to trigger the biggest changes in decades in the U.S.- and European-dominated World Bank and IMF, which agreed to give China, Turkey, Mexico and other developing countries a bigger say in picking leaders and deciding policy.

The boom has helped communist leaders pay to cultivate “soft power” — educational and media activity to win hearts and minds abroad.

Of course, even after slipping to third place, Japan is still rich and comfortable — the Switzerland of Asia.

The society that created hybrid cars and the Walkman has 99 percent literacy and the world’s longest life expectancy at 83 years. Tokyo is the capital of fine dining, with more Michelin-starred restaurants than Paris.

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