Posted on 01/26/2005 4:11:01 AM PST by TigerLikesRooster
China, panacea for the world economy
By George Zhibin Gu
Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.
China's sudden emergence on the global stage is causing great debate. To some people, its development will mean a Chinese domination of the 21st century. A new world power, as historians claim, does alter the world's power balance, often leading to new conflicts.
Is a prosperous China good news or a disaster in the making? The truth is that a rising China will benefit the entire world, not just China. China's expanding economy is creating a new global engine of growth. Today, China has become the biggest frontier market, as well as a global manufacturing center. It provides numerous direct benefits for the outside world.
First, consumers can get cheaper products than ever before. China now produces a vast range of the cheapest products. This offers new choices for global consumers. To be sure, it saves countless money for them. Why should anyone pay US$200 for a microwave oven when he or she can pay $50 for one that is made in China? How many people want to shop for the most expensive products? Maybe 1%. But most of us can get by without a Rolex. That's how Wal-Mart has attained $260 billion in sales. For this, China is playing the right role. (But some Rolex lovers claim that China is causing deflation.)
Second, all sorts of new opportunities emerge as China's economy expands. The world is economically connected more than ever before. It produces more wealth for the world as a whole. In fact, most finished products require shared work involving numerous nations. No a single nation can dominate in this endeavor. A TV set is made in China, but its chips are from Europe, Japan and the United States, metals and raw materials come from Latin America and Australia, and some other components come from a number of developing nations. In fact, multinationals make more profits than the Chinese manufacturers. For every DVD (digital video disc) made in China, the foreign technology patent holders charge at least $5. How much do the Chinese manufacturers make? Fifty cents. Chinese businessmen say they make less money making DVDs than selling vegetables on the street corner.
Wal-Mart purchases goods worth about $15 billion from China. But the tens of thousands of Chinese suppliers combined can make less than 5% of Wal-Mart's profits. China's development is creating a new engine of growth. China's developing economy means, first of all, a rising domestic consumption. In 2004, international players sold around $560 billion to China, well over $410 billion for 2003. This Chinese buying spree could reach $1 trillion within five years.
In China's stores, foreign brands are countless. When a consumer wants a washing machine, he or she is confronted with vast choices: Sharp, LG, Siemens, Electrolux, Hitachi and Whirlpool, among others. That's of course after the consumer first decides on which store to go to in the first place: Makro, Justco, Carrefour, Wal-Mart or PriceSmart, among others. There are some 300 foreign retailers in China now. They are following each other's tails closely and adding new mega-stores in a hurry. More international retailers are on their way to China. Booming Chinese retail means a gold mine for them.
There are signs that Japan could finally be coming out of its economic slump. It is significantly aided by its ever-increasing exports to China. In fact, in the past few years, 50% or more of its increased exports have been taken in by China. Without China, Motorola, Samsung and Nokia would be 20% smaller. Indeed, China has saved their fortunes. They are grateful to the 330 million Chinese mobile users. According to their projections, this market will jump to 500 million by 2007. How can any telecom player avoid China?
Benefits are hardly limited to these things. In fact, China's emergence shows the greatest convergence of civilizations. In today's world, sharing is more important than war - cold or hot. Today, the world is more economically connected. But world politics lags behind. The Cold War ideology is still very much alive. It continues to block the road leading to more global sharing and common wealth as well as joint responsibilities. The alternative is terrible for all. If China sticks with a general poverty, would the rest of the world benefit?
In short, the 21st century belongs to the world. China can only share its progress with the world. This makes a sharp departure from the past. Europe's previous global reach led to dozens of colonies and the suffering of thousands of people in the outside world. The rise of Japan and Germany led to bloody wars in the past. But a developing China offers opportunities for the whole world.
George Zhibin Gu is a business consultant based in China. He holds a PhD from the University of Michigan and generally covers M&A, venture capital, business expansion and restructuring.
Ping!
I forgot. The article reads like an undergraduate term paper.
In the U.S., I don't believe that one has much choice for a washing machine except for Whirlpool, Maytag, or General Electric.
Bump
Interesting. Don't think I will say much else right now.
He's right, except it's in quality not price that the cheapness sets in.
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