Latest economic figures released by the Chinese government suggest the country is poised to overtake Japan as the world’s second largest economy this year. The speed at which the country has rebounded from the global downturn has proven that the ‘economic tragedy’ which some analysts predicted for the country were largely unfounded. As to higher wages and inflation becoming the ‘death knell’ of its manufacturing sector, that too has not materialized. China’s manufacturing sector expanded at the fastest pace in more than five years in November 2009, to 55.7 from 55.4 in October, according to a purchasing managers’ index compiled by HSBC Holdings. Readings above 50 signal expansion. Massive stimulus spending by the Chinese government, including tax incentives and rebates to boost domestic spending has been largely effective, resulting in a GDP growth forecast of around 9 percent for the year. Overall, China has adjusted well to the impact of the global financial crisis and is poised to remain strong and competitive this year. Long regarded as the strongest source of low cost production, the manufacturing industry in China is expanding both vertically as well as horizontally. Higher value-added activities such as product design and development; technical service and support; and supply chain operations and efficiency are taking shape as companies realize that future competitiveness is reliant on present-day adjustments. And the country is moving into high technology manufacturing as well. Will China’s economic bubble burst? That is the question that many economic analysts have been pondering since comparisons were made to the boom followed by bust of the Japanese economy in the late 1980s. Many red flags have been raised by doomsayers, urging the Chinese government to tighten its monetary policy or face economic decline. One cannot then, avoid using the oft-used word "sustainable” when questioning China’s current economic standing. I believe China’s growth is sustainable for a few important reasons, namely that the country is still a long way from realizing its full potential and most importantly, that it has the resources and the system in place to continue its development at the current pace. Today, China’s GDP per head is less than 10 percent that of Japan and the US, and it has a far higher population. This means that the country’s labor force, half of which is still based in villages and farmlands, can still be moved into industry to bolster its manufacturing base. In manufacturing terms, we often talk about capacity and China has plenty of excess capacity for investment and infrastructure development. These are fundamental to sustain future growth. While this growth may slow in some years in true cyclical fashion and there might be bumps along the way but if history is a good indicator of the direction a country is heading, then China is heading for the skies. China has jumped from being the world’s tenth-largest economy to number two in the past 20 years. How soon do you think it willtake before it reaches pole position? | 
