In fact China has become the economic competitor we've always feared. And that strength has grown as Beijing's geopolitical ambitions in the South China Sea begin to take shape. This year's Asia-Pacific Economic Cooperation leaders' summit in October will reinforce the anxiety in government ministries. Pictures of an economically booming Shanghai beaming across the Asia-Pacific will reinforce the image of a resurgent China. It is now the strongest magnet for foreign direct investment in the developing world, eclipsing Brazil.
China is a vast factory flooding Jakarta, Manila and Bangkok with inexpensive goods.
The region's other low-cost manufacturers and assemblers are stumbling badly in comparison. Chinese-made appliances, electronic goods and motorbikes are now commonplace throughout the region. But its cheap exports have been generated by a deluge of easy credit. The concern is that an asset bubble similar in scope to Asia's 1997 crisis is growing. If in five years the socialization of costs in China continues to be ignored, the country's banking system could collapse.