I believe China should be able to sustain 8 percent annual growth over the next 20 years. China is drawing in investments, capital, technology, foreign management expertise and talent. It is investing heavily in education and human capital. Much of its growth is also internally generated and increasingly consumer-led. 12. China is forcing the pace of change throughout Asia. This is for the better. The Chinese dragon will usher in a new prosperous Asian Century. For example, as China grows, so will its appetite for imports. Credit Suisse First Boston expects China to become the second largest consumer market by 2014. That is less than 10 years away. The Chinese middle class is expected to reach 45 percent of the population by 2020, around 580 million or more than 4 times the current Japanese population. 13. However, China's growth will not be an upward-sloping straight line. The country faces very real challenges. In 2003 when I visited China, Premier Wen Jiabao explained to me the magnitude of problems facing China's development through the concept of 'division and multiplication'. China's wealth of resources became very small when divided by 1.3 billion people, while a small problem became huge when multiplied by 1.3 billion. Premier Wen also highlighted the divide between the coastal and inland regions and stressed that China's priority was on economic and social development. 14. China will also have to cope with the impact of development on the environment. Take for example the use of chopsticks.
China uses 45 billion pairs of disposable chopsticks per year, which requires 25 million full-grown trees to make (International Herald Tribune, 27th October 2005). This means massive deforestation and an adverse impact on the environment. Another problem is the widening income gap. Bear in mind that there are 26 million Chinese still living in abject poverty, earning less than $ annually. China will also face the trickier problem of managing the demand for political change and greater political participation as it becomes a middle income country. For the first time, China recently published a White Paper on 'Building of Political Democracy in China'. 15. China's leaders know that they will retain the mandate of heaven only if they deliver the economic goods and a better standard of living. Having tasted the fruits of market-oriented policies, the Chinese people will want more. To grow, China needs a stable external environment. This is why China's leaders have been careful to assure the world that it will pursue a 'path of peaceful development' ( ). They are well aware that China's rapid growth is creating enormous pressures on the international system and that they need to craft a development and foreign policy strategy that will ensure the peace and stability needed for its growth. The trundling Indian elephant 16. Let me now turn to India, which is also shaking off old mindsets and taking pragmatic steps toward reform and liberalisation. 17. I first visited India as Prime Minister in 1994.