China Incorporated (Part Two)
On the one hand, China is one of the main buyers
of American treasury bonds helping to finance the deficit and to maintain low
interest rates in the U.S. At the same time, China, whose goods shipped to the
U.S. grew by 50 percent last year, is the second largest exporter to the U.S.
after Canada.
...A simple rhetoric will
not diminish the importance of the high sustainable rates of growth in China in
the last 10 years nor prevent it from being the second largest holder of
international reserves after
Japan.
...There is significant
indication that China will gradually cease from being a country of cheap labor
to become an attractive market for the world’s products and
services.
...The speed of Chinese
economic growth, the combination of centralized economy and open market, the
mixture of communism, capitalism, and authoritarianism baffle and disturb
western governments even as Asian nations like India intensify agreements and
relations with China.
In this global
context, it is egregious that our government and political leaders seem
oblivious to the fact that Mexico is loosing its appeal as a country that offers
interesting opportunities for investment and growth.... Instead, they should be
focusing their efforts to the formulation of a modern political agenda that
seriously address Mexico’s greater national problems and to making this
country more aware of and responsive to the developments in the rest of the
world.
The enormous fiscal and trade deficits of the
United States highlight the increasing strategic importance of China. Last
month, the U.S. current account deficit reached a staggering 5.7 percent of GDP
while the U.S. trade deficit marked a record of $61 billion. Both have
negatively affected the value of the dollar and have the potential to jeopardize
the U.S. economic recovery and to have a negative impact on the global economy.
The role of China in the American
deficit is a paradox. On the one hand, China is one of the main buyers of
American treasury bonds helping to finance the deficit and to maintain low
interest rates in the U.S. At the same time, China, whose goods shipped to the
U.S. grew by 50 percent last year, is the second largest exporter to the U.S.
after Canada. It has surpassed Mexico, which is now third.
The numbers are causing alarm to
American companies that cannot compete with the prices of goods from China. This
has led U.S. congressmen to promote protectionist bills, including those with
sanctions that, if approved, could pressure China to revalue its currency.
Obviously, these moves will not solve the structural problems in the U.S.
economy. A simple rhetoric will not diminish the importance of the high
sustainable rates of growth in China in the last 10 years nor prevent it from
being the second largest holder of international reserves after Japan.
China has demonstrated great capacity to
decentralize its economy and to initiate a selective and orderly process of
privatization. It has shown that it can develop productive and competitive
industries and has proven that it can support the increased consumption capacity
of its growing middle-class. There is significant indication that China will
gradually cease from being a country of cheap labor to become an attractive
market for the world’s products and services.
In the book,
China Inc.
(Simon Schuster, 2005), journalist Ted C. Fishman wrote that China is building
the most number of electrical plants in the world. Just in 2004 alone, China
invested $24 billion dollars, hiring international companies like Bechtel,
General Electric, Mitsubishi and Siemens to build these plants. This means that
in two years China would have installed all of Great Britain’s electrical
generation capacity. Fishman also analyzed the development of the automotive
sector and road construction. He wrote that car production and sales have grown
exponentially, such that a modern highway network equivalent to the interstate
network in the U.S. is needed to facilitate the traffic.
Despite the increasing importance of
China in the global economy, western governments still have not articulated a
foreign policy that recognizes the profile of the upcoming superpower nation.
The speed of Chinese economic growth, the combination of centralized economy and
open market, the mixture of communism, capitalism, and authoritarianism baffle
and disturb western governments even as Asian nations like India intensify
agreements and relations with China.
In
this global context, it is egregious that our government and political leaders
seem oblivious to the fact that Mexico is loosing its appeal as a country that
offers interesting opportunities for investment and growth. Unfortunately, in
the heat of the election campaign period, politicians are more attuned to battle
their opponents in the next presidential election. Instead, they should be
focusing their efforts to the formulation of a modern political agenda that
seriously address Mexico’s greater national problems and to making this
country more aware of and responsive to the developments in the rest of the
world.
Source:
Ted C. Fishman. China, Inc.: How the
Rise of the Next Superpower Challenges America and the World. Simon &
Schuster, 2005
Posted: Wed - December
14, 2005 at 07:00 PM