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SPEAKING
FREELY
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.
(Copyright 2005 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. |
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