AS Clinton’s recent eight day trip to China demonstrated, the Americans believe this populous state, with its hard-working, intelligent people, ancient civilisation and vast, untapped markets, was poised to dominate the world economy in the 21st Century. But that was last month. As Russia has discovered, in this global meltdown, depression is being exported from one country to another.

In this China, too, has been whacked over the head: to the point where it seems highly probable that it will be forced to devalue the renminbe, sending yet another seismic shock through Asia and then the West: and, worse still, precipitating a secondary round of devaluations of all other Asian currencies. In an effort to stabilise the region, Beijing had undertaken not to devalue: but its growth pattern depends on exports. As things stand now, it cannot compete against Japan and other neighbouring exporters without a devaluation.

China’s economy is being torn mercilessly apart. Not only is it being sucked into the crisis now ravaging the economies of all its Asian neighbours, but the current deadly flooding - the worst in 60 years - has itself delivered a hammer blow to the already slowing economy. The floods have already submerged some 22 million hectares of farming, and inflicted widespread economic disruption.

Superpower China may one day be, but on all present indicators, not in our lifetime, perhaps not for another 70 or 80 years. US optimism over China has always been overblown, precisely as it was earlier with the old USSR. It was taken in by the glossy, alluring China of the great cities, the coastal zone provinces and the Special Economic Zones, all presented for Western consumption.

While economic growth in China’s coastal regions has averaged more than 10% a year, many regions in this gigantic country remain isolated and undeveloped, little changed for all practical purposes in hundreds of years. As Professor John Gray of the London School of Economics insists, China factually is nowhere near a developed country. It is a developing country facing formidable and rising problems.

The country on the whole is still poor. Measured by its GDP - and not counting Hong Kong - China’s economy remains smaller than that of Italy. Corruption is endemic and real poverty increasing. Aside from Bangladesh and Egypt, China has less arable land than any other developing country. Despite its brutally applied one-child-per-family policy, the population (now standing at 1,2 billion) continues to grow, and is expected to hit 1,5 billion by 2018. Population growth, plus soil erosion, desertification, rapid industrial growth and other factors continually reduce available farm land.

China’s banking system remains critically weak. The US credit-rating company, Moody’s Investors Service, recently downgraded the country’s banking system, saying that the true financial health of China’s banks "remains impossible for anyone to measure accurately." Urgently needed reform of the country’s economy, banking system, state bureaucracy and parastatals carries increasing political risk because it involves the removal of many millions of jobs.

At present there are about 120 million migrant labourers seeking work in China. If the current restructural and privatisation programmes are fully implemented, that number could double.

The reform agenda calls for massive restructuring of the 370 000 state-owned enterprises: many, probably most, of them grossly overmanned, debt-laden, loss-making and bleeding red ink. At the end of June last year, these state enterprises employed some 73,1 million people. They have since shed 3,53 million workers, bringing their roster down to 69,6 million. It is calculated that at least half of these are still surplus to requirements.

Across the board, some 11,5 million people were laid off last year. Another 17 million are destined for the chop this year. China’s official unemployment figure is 3,5%. Most analysts say a more realistic figure is 10%.

It is foolish to imagine that China will always be immune from instability. A scenario in which unemployment rises, growth falls and deflation takes hold is one in which stable government cannot be taken for granted. Accepting that China’s growth rates are no longer sustainable it must also be accepted that China is now also standing in line for serious social strife, even revolution, as recently pointed out in the respected German intelligence review, Privat-Depesche. It states: