take a look at this:
I'm not saying it! it is the economist one of the most important economical news papers in the world.
That the peope in a country live in thrid world conditions does not mean that the country is not powerful economically, and China is the clear example. I'm talking about GDP in global terms, not GDP per capita.
As examples of what is happening in the world: do you know why the price of steel has been continually getting higher and higher in the past two years? china is demanding more and more steel, if a country demands so much steel it means that it's industry is producing a huge deal of stuff.
Do you know why the most biggest companies in the world are building factories in China? one of the reasons is because the manpower is cheap, but the main reason is that their citizens are a huge market yet to be exploited.
More information: China's exports grow 9% each year. EEUU in 2003 had a deficit of 130000 million dollars against China.
G8 is looking to let China enter. http://news.bbc.co.uk/2/hi/business/3797943.stm
As for the military power: