Growing pains: China's economy reveals costs

At the dawn of China's entry into the global economy, analysts and economists generally highlighted the benefits of China's integration: increased trade with developed-world companies, cheaper goods and the transfer of jobs to lower-cost production zones, walking hand-in-hand, of course, with the development of China. Most initial reviews regarded the economic changes precipitated by the new trade links as plus-sum.

Trade costs surface

At its core, that macroanalysis has remained the same: the China/global economy nexus is still viewed as plus-sum, certainly not zero-sum, but analysts and economists are beginning to note the liability side of the ledger, a view of the relationship that can be termed "plus-sum with costs."

For example, a robust Chinese economy that increases trade, commerce, earnings growth in the Eastern and Western hemispheres is one thing. However, a runaway Chinese economy that rapidly displaces whole industries, distributes faulty and, in some cases, unsafe/hazardous products, creates barriers to value-added imports and stresses to depletion level vital commodities and raw material resources, is another matter. As with any multilateral arrangement, analysts and economists are beginning to note the sources of potential conflict in the China/global economy relationship.

Coal and oil

Further, for the most part China has been able to ignore European and U.S. (and other nations) concerns about the downside to China's mega-growth economy, but that response may not work when the issues of coal and oil hit center stage. That's because, left unaddressed, China's surging coal use stands to render essentially useless the west's effort to stem the build of greenhouse gases and stop global warming, most climatologists agree. Likewise, China's growing oil demands will result in considerable environmental damage and help propel oil prices to higher levels if current oil use trends continue.

And unlike foreign criticism of its trade surplus, climate change is a reality that will be very hard for China to ignore.