From a European perspective, the sheer numbers involved when one considers China are staggering. One in every five people alive today lives in the People's Republic of China, which has a current population of roughly 1.35 billion. Over the past 20 years, China has undergone rapid urbanization, driven by explosive economic growth, and now more than half its population live in cities. China’s economic transformation began in the late 1970’s when it abandoned central planning and pursued policies of ‘reform and opening up’, and recently China overtook Japan to become the world's second-largest economy in terms of GDP.
The current economic system is best described as 'state-led capitalism', i.e. a market economy in which the government and State Owned Enterprises (SOEs) play a leading role. Much of the dynamism of the Chinese economy over the past thirty years has come from its ability to manufacture goods for export at low-cost, but with rising wages China's priorities are now to ascend the value chain and develop its own domestic consumer market.
The People's Liberation Army (PLA) is now in the process of transforming itself from a largely mechanized army to a technologically sophisticated one, capable of winning 'local wars under informationized conditions' and has invested heavily in networked and technologically sophisticated systems. Large increases in the annual budget allocation for defense have supported the modernization drive.
In the security area, China is playing an increasingly important international role, as seen in its contributions to UN peacekeeping operations and to anti-piracy operations off the coast of Somalia. As China's interests expand overseas – particularly in politically unstable, resource-rich countries – the PLA may find itself called upon more often to guarantee the security of Chinese nationals working overseas.
Through its China Initiative project, ISDP follows developments in China's political, military and economic affairs closely and works with partner institutions such as the PLA Academy of Military Science (AMS) and the China Institutes for Contemporary International Relations (CICIR) in order to better understand China's contemporary realities and to foster dialogue and exchange between China and Europe.