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Domestic challenges

The rise of middle class, which is projected by Morgan Stanley to reach 300 million, or 40% of the Chinese population by 2020, can be challenging for the Chinese government.

"The middle class tends to be very radical, in terms of free thinking and being very global," said Handel Jones, founder and CEO of International Business Strategies, Inc. "They also tend to have mobility," he added.

"So what you have to do in China is build the middle class so they will consume more products. But you still have to produce more than you consume in order to export. So you should balance for now," Jones told IBTimes in a phone interview.

Besides, moving people daily to deploy them as labor is another pressing issue as the big cities are very crowded, like in Beijing, Shanghai and Shenzhen.

Jones, who has been involved with Chinese governments and state-owned and private businesses for more than 30 years, noted that "What China is doing is building fast railways. You can move by railroad from shanghai to Beijing in 2-3 hours. They have a lot of flexibility for people moving around." He noted that China also has to provide other supporting systems including the huge educational systems and good medical services.

"What China has to do in 30 to 50 years is what takes other countries 100 or 200 years," Jones said.

Challenges abroad

"Due to fears of no longer being No. 1, there could be more criticism of business practices in China such as human rights," said Ted Sun, an international professor and expert based in the U.S. "Such judgment based on their value system should not interfere with China's development and modernization as a nation."

Other experts also agree with Sun.

"China's rapid ascent to the position of second largest economy-on its way to becoming the number one largest economy- should mark a turning point in US-Chinese business relations," noted Robert Vambery, Professor of International Business and Marketing at Pace University.

China may also feel more pressure from the international community on the issues of climate change.

"The Chinese government should be concerned of climate change issue because they do very little..." Vambery said. "My feeling is that they didn't do enough because they do not believe that the climate change was man-made, and therefore they did not believe that China should make climate sacrifices towards the climate change." Online Marketing Services Provider.


Winners and losers in the rise of the dragon

"The formal assumption of the No. 2 spot itself is really only psychologically significant to Japan, although they've known for a while that it was pending," says Larry Harding, founder and president of High Street Partners Inc., an Annapolis- based firm that offers international business services.

"In Japan, China's ascendancy, coupled with the aging of their population, presents very big challenges," Harding told IBTimes in an email interview. According to Harding, Japan has yet to really come out of their "lost decade", and seem to still be working to re-establish their footing, which is proven by their messy politics for the last five years.

"The influence for the rest of the world from the rise of China is already very, very significant," Harding said."There are too many examples to list, but one interesting aspect has been the worldwide rise in oil and commodities prices, as China's thirst continues to explode. This is great news for places like Africa.

"For the U.S., the rise of China has been felt in the rust belt as manufacturing jobs move offshore.

Is GDP everything for China?

"China may be the second largest economy in terms of GDP, but that makes the fact that China's per capita income is 10 times smaller than Japan and the United States," Kevin Gallagher, professor of International Relations at Boston University, told IBTimes.

China's Gross Domestic Growth (GDP) in 2009 stood at $4.9 trillion and the per capita GDP was just $3,700, far behind developed countries. Direct Marketing Services Provider.

"What's more, China is still home to one hundred million poor people and it is fast becoming one of the most unequal societies in the world," Gallagher added.

Gallagher noted that in 1978 China's Gini coefficient was 0.18 and is now approaching 0.50 and rivaling the most unequal places in the world like Brazil and Mexico.

The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality.

Though GDP may not be everything for China, the Chinese people can also benefit from the overall growth of the Dragon's economy.
According to Professor Gallagher at Boston University, China's economic status will give the Chinese "tremendous bargaining power at the WTO and elsewhere".

"China will demand more respect amongst the global business environment and command more 'say' in the various global organizations such as the UN and WTO," said Ted Sun,an international professor and expert based in the U.S..

Moreover, China may gradually change the current situation that America has the ultimate veto power with organizations like the United Nations and also provides the majority of the funding, Sun said.

"If a decision is not liked by the Americans, they can stop it from happening, even if many other countries are for the decision," Sun told IBTimes in an email interview. "With China's economic powers, they can balance the power of the Americans and perhaps play the world leader in making solid decisions in the future," he concludes.

China has already used its economic power to leverage access to new technology and know-how, according to Professor Gallagher at Boston University.

"We'll see what is next," Gallagher said. Media Marketing Agency.