The Chinese government has revised its estimate of how much the economy grew in 2007. The revision is upward and, if accurate, means that China has surpassed Germany to become the third-largest economy in the world. That may start some celebrations on the mainland, but the Beijing leadership knows better than to bask in the moment. China may be a rich country, but its citizens remain poor. More important, the global slowdown poses serious challenges to a Chinese leadership whose legitimacy rests on its ability to deliver increasing prosperity to its citizens.

On Jan. 14, China’s National Bureau of Statistics revised upward its estimate of economic growth in 2007, from 11.9 percent to 13 percent, reaching 25.7 trillion yuan ($3.5 trillion). The revision — the second for 2007 — underscores the unreliability of all Chinese statistics: Methodological rigor is a relatively new phenomenon in a society where reality itself is malleable and politics, rather than economics, may be the most important determinant of results. Hitting targets is more important than getting the numbers correct.

If the new numbers are right, China is now the world’s third-largest economy, besting Germany, whose GDP in 2007 was $3.32 trillion. And even if these numbers are too large, the trends are unmistakable: Chinese growth will continue to outpace that of Germany (and just about that of every other country). In fact, one economist predicts that China will overtake Japan — whose GDP was $4.3 trillion in 2007 — for the No. 2 position in three or four years. With a GDP of $13.8 trillion — and even accounting for the losses of last year and those anticipated for 2009 — the U.S. will retain the top spot for some time to come — 20 years at current trajectories, while most economists think it will hold the top position longer.

China’s blistering growth moderated in 2008. Most estimates have the economy expanding “just” 9 percent last year. That reflected both attempts by the Beijing government to slow growth and trim inflationary pressures as well as the impact of the global crisis that erupted in the second half of the year. Yet even slower growth is predicted: The consensus estimate is 6.8 percent growth for the fourth quarter of 2008, and 7.5 to 8.2 percent growth for 2009.

While most governments would be delighted to anticipate such a future, China’s leaders worry when growth dips below 8 percent. That is thought to be the lowest growth rate at which China can still absorb all new entrants into the labor market (college graduates and migrants) as well as workers shifting from former state-owned enterprises.

The promise of jobs and a better life has provided the foundation of the Beijing government’s legitimacy since it abandoned ideology in the 1980s and embraced reform. It is uncertain how ordinary Chinese will respond to a slowdown — or what the government will do if they protest.

Even if Beijing manages to keep its citizens happy or to suppress dissent, it is vitally important that the world properly understand the meaning of China’s rise. That phrase is used far too casually and its significance is usually misunderstood. China as a country is rich, but Chinese are not. GDP per capita in China was $2,800 in 2007; by contrast, in Germany, average income was $38,800. China is ranked among the bottom tier of nations by this yardstick. Chinese are proud of their country’s economic accomplishments, but they also measure how the economic development has affected their own lives. The greater the economic disparities, the greater their own discontent.

Thus the Chinese leadership’s insistence that their first priority is economic development is not just rhetoric. Reform has lifted 300 million Chinese out of poverty, but just as many people still live on $1 to $2 a day. The unevenness of wealth in China, and the visibility of the vast disparities, is another source of tension and potential unrest.

The global slowdown compounds unease in Beijing. China’s growth strategy has been based on exports. A recession in destination markets — exports dropped 2.8 percent in December, the biggest fall in a decade — means that in order to maintain growth China has to shift its thinking. The government has launched a 4 trillion yuan ($586 billion) stimulus package to stimulate domestic demand, but it is unclear how much of that money will be spent or where it will come from.

This is the reality of China’s rise on a rickety foundation. The gains of recent years are impressive, but when seen in perspective, China has a long way to go. Claiming the No. 3 position among global economies is an achievement that only highlights how much more must be done.

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