Maybe it's just what happens when a country gets used to winning. Maybe, having conquered everything from the gold medal rankings at the Summer Olympics to the world's manufacturing business, being second doesn't mean anything to China any more.
Unofficially, China is either the second-largest economy on the planet now or is right on the cusp of that status. At some point in the past few months, likely, the output of its 1.3 billion citizens surpassed that of Japan - just as it blew past Germany a few years ago and France before that. But within China, there are no trumpet blasts, no parades or state celebrations and barely even any official acknowledgment of the fact, aside from an off-the-cuff remark this week from a relatively minor figure in the government.
As for everyone else? They're busy using the moment to sharpen their projections (read: wild guesses) on when China will close the $9-trillion (U.S.) GDP gap with the United States. (The betting range seems to be some time between 2025 and 2035.) This is inevitable, as any economist will tell you. China will be Number One.
Unless, of course, it's not.
We don't wish to be dour about China's economic miracle or focus on the negative statistics, such as the fact that its economy, when measured on a per-capita basis, is still far smaller than that of, say, Estonia. China has achieved its stunning growth over the past three decades mostly through amazing improvements in productivity (yes, helped along by a cheap-currency policy).
It's just that in all the fuss about China's rise, little attention is being paid to the obstacles that could slow it down in its race to the top. We'll focus on two.
The first risk is the likelihood of a severe financial crisis at some point, the consequence of barely-controlled growth in its banking system. An old axiom about banking goes: "If it grows like a weed, it is a weed." Too often, it proves true. An excess of credit, flowing into the economy too quickly, is usually a recipe for rising asset values today and heaps of bad loans tomorrow.
In just five years, credit to non-government borrowers in China has more than doubled, to 49 trillion yuan ($7.44-trillion Canadian) from 23 trillion. The balance sheet of the Industrial and Commercial Bank of China has grown nearly 150 per cent since 2004, according to data from Standard & Poor's/Capital IQ. "The scale of the expansion in credit has been unprecedented," said the International Monetary Fund in a report on China this week. In some cities, there's a bona fide real estate bubble.
"At this point, the banking system looks well placed to withstand a significant deterioration in credit quality," the IMF added. But the most important words in that sentence are the first three: at this point. It's far too early to know the number of bad loans made in 2009, when the government pushed state-controlled banks to lend big and lend often and credit grew by (gulp) 31.7 per cent.
The second risk is demographics, always a key factor in emerging economies. An army of migrant workers, eager to improve their lot in life and willing to move to the cities to do it, has been a driving force behind China's industrialization. But over time, the one-child policy has dulled that advantage.
Demographically, China isn't Japan, but it's a greyer country than you might think. Its median age, about 35, is barely lower than that of the U.S. and much higher than Brazil's (29) or India's (26). The Economist described China's as enjoying a "demographic dividend" - nearly three-quarters of Chinese are of working age, between 15 and 64. But that number is about to peak, and unless there's a loosening of government policy on fertility, the proportion of elderly-to-active workers is likely to rise sharply in coming decades.
China's rise to No. 2 has lifted tens of millions of people out of extreme poverty. That's something to applaud. It's also something that ought to be kept in perspective.
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