For China, it's a record buildup of foreign capital. For the rest of the world, it serves as a reminder: To an increasing degree, bureaucrats in Beijing aren't just guiding their own economy, but the world's as well.
In coming days, China's stockpile of foreign currency reserves, the fruits of fast-growing exports, will reach the unprecedented sum of $1 trillion. What's important isn't the level – a nation's foreign reserves are rarely big news – it's what it represents.
China is growing so fast that it could, less than two decades from now, rival the United States as a key driver of the world economy, economists say. That development presents big opportunities for global growth – but also great risks, if China's leaders mishandle their nation's emergence and transformation on the world's economic stage.
Looming questions about global growth, free trade vs. protectionism, and even the financial well-being of future US retirees could have answers for which key parts are stamped, "Made in China." The juggernaut is just getting started.
"If our simulations are anywhere close to the mark, the world has a grace period of about five years before it really begins to feel the heat of China's emergence," Stephen Roach, global economist at the investment bank Morgan Stanley in New York, wrote in a report earlier this year. "How the world then copes with China may well be the biggest what-if of all."
Already, China is the focal point in a worldwide debate about the virtues of the headlong pace of globalization. Workers in many nations have lost manufacturing jobs to lower-cost laborers in provinces near Shanghai and Hong Kong.
"In the developing world, there's China and there's everybody else," says Charles McMillion, who tracks China at consulting firm MBG Information Services in Washington. "Their five-year plans are just truly the economic-development equivalent of the Great Wall."
By repeatedly clocking 10 percent annual growth, China has provided a steady engine in a global economy where Japan and Europe have faltered.
Yet the $1 trillion in reserves, up fivefold since 2001, are a symbol of China's challenges as well as its successes. China now has an imbalanced economy, driven too much by exports – which keep adding to those reserves – and not enough by domestic consumers, analysts say.
China is trying to manage the transition to a more consumer-driven economy.
If it can keep its pace of growth in the process, it will be a growing force globally. In his analysis for Morgan Stanley, Mr. Roach extrapolated plausible growth rates into the future for China, India, Europe, Japan, and the US. This is merely a simulation, not a formal forecast, but the results are telling: In its contribution to world GDP growth, China would surpass the US by 2025. That would be up from about 35 percent of the US contribution in 2005, and 60 percent in 2015. India's contribution would surpass Japan's by 2025, but remain far behind China and the US.
Uncertainties abound, of course.
One risk for China and the world is that its reforms could falter. Some scholars believe that at some point the contradictions inherent in China's blend of capitalism and state control will lead to an economic collapse and social unrest. That would be hard on China – and on a world now reliant on Chinese-made goods.
An opposite risk arises if China continues on its export-driven path. That could add fuel to a backlash against globalization in many nations, including the US.
In elections Tuesday, for instance, polls suggest that Democrats are favored to retake control of the House of Representatives. They are generally more skeptical of free trade and more prone to take a tough line on China.
Many economists worry about a possible revival of protectionism, globally, which could dampen growth. But some also say that the worries are well-founded, as jobs jump around the world faster than ever before, leaving many workers behind.
China's foreign-reserve buildup has a brighter side for the US. Much of its money now flows into US Treasury bonds. In the long run, it might even provide modest support to the US stock market, if China has excess cash to invest worldwide. That could help ease the burden of baby boomer retirements.
America's high public and personal debt levels are now being supported by foreign lenders such as China. If that ends, the dollar could come under downward pressure, hurting US purchasing power.
"I expect that the Chinese are going to use more of these reserves to invest in other parts of the world," says Paul Kasriel, a Northern Trust Co. economist.