Will China be the Great Wall Street?
02/10/2006
John Patrick Ford,
San Diego Daily Transcript
Writing about China in today’s global environment is like describing an 800-pound gorilla to someone who has never seen a gorilla. Perhaps the simple approach is to compare China to the United States by these basic realities.
The Chinese save a lot, Americans spend a lot; China produces, America consumes. So observed Harold Brown, President of California Institute of Technology and former Secretary of Defense in the Carter administration, to a group gathered at the University of California, San Diego School of International Relations/Pacific Studies (IR/PS).
Brown applied an historical precedent to account for the emerging powerhouse of Eastern Asia. Japan and Germany became international powers in the first half of the 20th century. The Soviet Union was a force in the second half while China was suppressed during the entire century by warlords and communist ideology. Now the Chinese shape the political and economic environment for the 21st century.
What is China’s political future? The speaker predicted that it may be ademocracy by 2025, but it won’t be recognizable to the western world. China’s version will be more like an authoritarian democracy. However, there will be more transparency due to domestic I-T exposure into global affairs.
U.S.-China trade relations by 2025 forecast a Chinese GDP of $7 trillion, only 1/3rd of the U.S. GDP. Energy shortages are a threat to both nations’ growth. Competition for global oil production will drive up demand to 13 million barrels a day by 2025. These were the stark predictions by President Brown who concluded that growth in the future depends on education. “Knowledge is only one piece of the puzzle. Enterprise is a major component,” he advised.
Another veteran Washington D.C. diplomat stopped by San Diego two weeks ago enroute to the North Korea nuclear talks. Assistant Secretary of State Christopher Hill and former ambassador to South Korea told a group at University of San Diego that the century of Asia is upon us. If the U.S. expects to deal with the Chinese, we need to understand them.
The sooner, the better if you are tracking the tremendous growth of China’s industrial capacity. The current annual rate is above 9 percent compared to a modest 3-4 percent for the rich nations. Last year China’s trade surplus tripled to a record $102 billion, reported the New York Times. This is one of the reasons the U.S. inflation rate has been contained, if you believe the modified Consumer Price Index used by the Federal Reserve that favors low-cost imports and omits energy and food.
Some economists show worry lines over how long China can maintain such repaid growth. The banking system is burdened with untold amounts of bad loans. China’s banks have financed too much capacity as dozens of cities are vying to become another Shanghai with modern skyscrapers, five-star hotels and super highways.
Before long China will seek a seat at the G7 table, according to Stephan Haggard of the IR/PS faculty. First its undervalued currency needs adjustment to satisfy other central banks sitting at the table that believe the yuan should be revalued to match the customers’ exchange rates.
We hear so much about U.S. imports of Chinese products that other markets are often overlooked. North Korea’s trade with China is up from 25 percent to 40 percent of the poor nation’s GDP, making it a Chinese satellite, according to a Korea Economic Institute study. Despite China’s huge holdings of U.S. Treasury bills, its largest external investments are in Hong Kong and Taiwan.
The impact of Asian automakers on the American Big Three was brought to light during the build up to last Sunday’s Super Bowl game in Detroit. The loss of jobs and plant closures shows on the mood of the city that once was the powerhouse of American industry. Sales of Asian car models jumped over 11 percent in January, reported the Associated Press, nearly twice as much as General Motors and four times the Ford sales increase.
Asia and neighboring India and Indonesia have defined globalization over the objections of organized western labor groups that see jobs evaporate with outsourcing to a cheaper labor market. Any meeting of international trade or monetary agencies is certain to draw protesting mobs. It’s a wave of change that can’t be turned back.
That’s why The Economist recalls an old Chinese proverb. “What you cannot avoid, welcome.”
(Editor’s note: This is the last of a three-part series reviewing the impact of Japan, Korea and China on U.S. policies in Asia and the American economy.)
Ford is a freelance writer located in San Diego. He can be reached at johnpatrick.ford@sddt.com.
