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The World

March 30, 2011

Developing economies' lead over rivals poses risks



Unburdened by a financial crisis, China, India and other developing countries resumed fast growth as they continued their transition from agricultural to industrial economies. In fact, they're now generating their own growth instead of relying on exports to the rich world. The World Bank says, for example, that internal demand — including business investments, government programs and consumer spending — accounted for 80 percent of China's growth last year.

"The emergence of a huge middle class in both China and India is generating internal demand," says Lawrence, co-author of the forthcoming book "Rising Tide: Is Growth in Emerging Markets Good for the United States?"

An example, in the southern Chinese city of Dongguan, is Xu Maolin, 31. Working as a mid-level manager at a factory that makes medical equipment, auto parts and aircraft components, Xu earns more than $7,200 a year — a middle-class living in a country where the per-capita income is $3,650.

A decade ago, Xu left a poor farm village in central China for a job at the Dongguan factory at $100 a month. His wife and two children live in a house he bought in his home village. He also owns an apartment in Dongguan that he rents to other migrant workers.

Xu has an air-conditioned room to himself in the factory dormitory. After work, he logs onto his desktop computer to read news, download movies and chat with friends and family.

For all its benefits, fast growth is causing problems for China and other developing countries. Surging demand for commodities — oil, grain, steel — is pushing prices ever higher. Inflation is running near 5 percent in China, over 9 percent in India and near 11 percent in Argentina, AP's Global Economy Tracker found. Inflation in the United States was just 1.9 percent last year.

"I don't feel I'm any better off than, say, last year," says Li, a waiter in Beijing who would give only his surname. "My salary might have gone up a little bit this year. But the prices of everything just went up like crazy."

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