Just read in the FT today about the Italian Government trying hard to sell their strategic holdings and bonds to the Chinese. It was a 360 for the Italian finance minister who once complain of the Chinese "reverse colonization" of the West. Indeed, it is a proud day for the Chinese people to be so wanted and desired in the world after two hundred years of weakness and being viewed as a country and race that will not rise again, a kind of relic like Egypt or Rome. It was in no small measure due to the current Communist leaders (since Deng Xio Peng that is) that led an open market economy that created such a boom.
The success of China was actually an old story. It followed the footsteps of the Asian countries that over took the United States as the chief manufacturer of the World. It was Sony that overtook Zenith as the main manufacturers of electronics appliances eventually just as Toyota took the automobile market away from GM. Cheap labor and better made goods eventually flood the market and eventually took the United States out of the game. Under political pressure, the Japanese automobile industry began to produce their cars here with joint ventures or overtook American companies. It was the Japanese that coined the formula for success that was followed by Hong Kong, Taiwan, South Korea and ultimately China. It was old hat to say that China took jobs away from the States, when they left for Japan and other Asian countries years ago. That was of course due higher production costs (higher wages and union power) here made it less profitable and desirable for manufacturers to continue their operation here. Those who stayed employed cheap labor from Mexico and move their production there. Of course the story did not stop there. China's cheap labor is getting comparatively expensive to some manufacturers, so some move from China to Vietnam, where the wages are still dirt cheap. That kind of arena is one the American laborers cannot hope to return as the cost of doing business cannot compete with third world countries.
China now being built as a cash rich country due to years of profitable business with the world (the % of business with the United States is still low compared to Europe and other countries). Learning from the fall of the Japanese experience of the 80's, where diversification and not enough restrictions on the overheating of the economy resulted in 20 years of slump. In fact the US economy is currently in the same boat, hence the Economist cover showing bother Germany &US leaders in Japanese style images. The Chinese government had invested heavily in US Government bonds, both as strategic and political move that is paying dividends now. For those who read enough books on Chinese history, the Chinese governments are usually more political than economic in their considerations. Those bonds has become an insurance policy against US interference into China's internal policy (that included Taiwan, Hong Kong & Macao). It is perhaps ironic that given the timing that China is the last thing on the minds of the United States right now as internal problems of jobs, spending, education and infrastructure clouded the agenda, not to mention the threat of a European economic collapse due to the Euro. China is still featured as a side show, but how much of that could be as urgent compared to the polarization of the country and the brokenness of the political machine that is a tidal wave that threatened to cripple the country as the debate of the debt ceiling had clearly shown.
It is my believe that China will continue to expand politically and economically as the needs of the Chinese will demand that. 1) because of the growth of industrialization in China, the pollution had led to the depletion of China's natural resources like food & water. Which is why they try to colonize other countries to produce enough food to feed a growing population. The one child policy had slowed the growth but not entirely. 2) Yes by investing in other countries, that could spread the risk around. hence I think deals like the Italian deal would attract both Chinese government owned companies or the growing privately owned industries to come into the action. 3) With all this growth going on, one could sympathize the reason why they put on the crews on foreign influences and any possibility of the disruption of the good times. The Arab Spring had taken China by surprise, and any forms of revolutions could disrupt the country and going into chaos again. In order to have democracy in a country, one needs a affluent and well educated middle class in order to succeed. The prime example is the change in Singapore, where the middle class is the majority in the country. The reverse is Taiwan, where there is democracy but also corruption. It is a situation in progress that could led to the true democracy that the people could hope for. However it is not what China could afford at this moment. What they truly need is laws that the international community could trust and believe.
No comments:
Post a Comment