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The Asian giant is embracing innovation once again and relying less on copying technologies

US investment guru Warren Buffett enhanced the China brand last year when he invested US$230 million (Bt7.8 billion) in a 10percent stake in BYD Company, a Shenzhenbased manufacturer of automobiles, rechargeable batteries and cellphone parts.

Recent news reports suggest Buffett made about $1 billion in paper profit from the investment due to a rise in the value of BYD's shares on Hong Kong's bourse.

But the more important point is that BYD and other Chinese companies have started to compete in the global market  particularly in the energy sector.

Once, China was blamed for a spike in the prices of crude oil and other commodities due to high demand resulting from its high economic growth.

Now, automakers are engaged in a race to produce fuelefficient cars.

BYD, which stands for Build Your Dreams, has joined this race. As a specialist in rechargeablebattery technology, it is seen as having an advantage over its competitors. Western media have praised BYD's electric hybrid car, which can run for 100 kilometres on a single battery charge and costs an affordable $22,000  far less than its Japanese competitor, the Toyota Prius. Lower labour costs contribute to the Chinese hybrid car's lower price.

Buffett is betting that BYD will become the world's largest automaker and become a leader in rechargeable batteries and solar power.

Wang Chuanfu, the chief executive of BYD, has been praised by Charlie Munger, Buffett's partner, as a combination of Thomas Edison and former GE chief executive Jack Welch, combining excellence in both technological innovation and business acumen.

To some, Wang's success story heralds a revival of the spirit of innovation in China, whose history is dotted with the invention of many technologies, famously including gunpowder in 9th century.

If Chinese firms - or any firms, for that matter - discover an alternative to fossil fuels or a way to make cars that are both safe and environmentally friendly at an affordable price, it would be very good news for consumers around the globe.

Technological advances in the energy field are in great need now and for the future.

What are the implications of rising China for Thailand?

Sompop Manarungsan, an economist at Chulalongkorn University, believes China is learning fast on the technological front. "China has a triple approach: investing in research and investment; copying others; and buying new technologies," Sompop said.

Sompop warned Thai firms to move now on research and innovation if they want to survive.

China has a strategy to penetrate every market segment, from mass production to the premium market, he said.

China's abundant labour resources give it an advantage in reducing costs. Its large scale of production also reduces costs, he said.

Sompop fears Thai firms will see their role limited to supplying raw materials such as tapioca and rubber sheet, or intermediate goods such as electronic parts, to China. These play an insignificant role in supply chains, he said.

The Finance Ministry believes the Chinese market has the potential to pull Thailand out of recession, as exports to the country have improved in recent months, despite remaining in a steep decline to other countries.

Fiscal Policy Office spokesman Ekniti Nitithanprapas still believes in the "decoupling" theory, which holds that Asia, led by China and India, can grow without the US and European markets. He said sustained growth in China and India has contributed to improving conditions in the Thai economy.

Now that Thailand and its fellow Asean countries have succeeded in inviting China, Japan and South Korea to participate in a reserve pool worth $120 billion, the Finance Ministry aims to set up an Asian bond guarantee fund to facilitate fundraising within Asia for local firms.

The government also expects China will increase investment in a road network linking China and Singapore.

Teerana Bhongmakapat, professor of economics and dean of Chulalongkorn University's Economics Faculty, takes a more cautious view of the Chinese economy.

China is likely to continue expanding at a fast pace, but the rate will depend on the recovery of the global economy, as China depends largely on exports. India depends less on exports. China's economy is currently expanding with the help of large government stimulus measures, while its exports and imports are still seeing steep declines, Teerana said.

If the global economy does not recover fully in the next two or three years, China will face serious trouble as its resources will dwindle, the academic said.

Teerana pointed out that one important issue is the increased uncertainty China faces as it embraces capitalism, as foreign investment could flee the country at any sign of trouble. If a more attractive investment destination were to appear, capital flows could reverse their course from China.

One problem that China has to tackle is cleaning up the country, which suffers serious pollution due its rapid industrial development. China must use its resources to clean up the industrial zone along its east coast, said Teerana, warning that if China fails to solve the issue, it could affect foreign investment.

Political stability is another key factor in China's expansion. If China can maintain its political stability it will be assured of sustained growth, Teerana said.

The World Bank has urged China to open its service sector, which should boost domestic demand, as a way to depend less on exports. Sceptics argue that China uses primary resources such as crude oil unproductively.

While the Thai tourism and logistics industries benefit from economic links with China, people living along the Mekong River who earn their keep from the waterway appear to be the losers. They have complained about unusual rises and falls in the water level, which adversely affect fish stocks.

Chinese authorities control the water levels to facilitate transport by boat in southern China.

Increased investment in southern China could see an increase in pollution of the Mekong River, which would be a nightmare for all people living along the river in Thailand, Burma, Laos, Cambodia and Vietnam.

Thai entrepreneur Chavalit Nimlaor has started building an industrial park in Xishuangbanna Jinhong in the southern Chinese province of Yunnan. He was certain that Chinese authorities would be very strict on environmental issues, and would not allow manufacturers to pollute the Mekong.

But as China's political system is relatively closed, its system is open to corruption. In China, authorities act as watchdogs on the environment, a role played by civil groups in most other countries.

Furthermore, Beijing's continued censorship of discussion of sensitive political issues on the Internet is a cause for concern.

This is the final part of the "China's Emerging Economic Power in Terms of the Financial System and Asean" series.