China on top
Thursday, 14 January 2010
Maswood Alam Khan
China overtook the United States as the world's leading exporter of ICT goods such as mobile phones, laptop computers, digital cameras etc. in 2004, passed Germany as the third-largest economy in 2007 and surpassed the United States not only as the biggest auto maker in the world but also as the world's biggest local market for cars and vans in 2009. And on 9 January 2010, the world heard the news that China overtook Germany as the world's top exporter in December 2009.
By 2010, economists believe, China is poised to dethrone Japan and occupy the throne as the second-largest economy in the world. Then, it is perhaps only a matter of time before China, if the present trend continues, will topple the United States to climb up all the way to be on top of Mount Everest of the economic world.
The newest sign of China's rise as a global economic force emerged when its December 2009 exports jumped 17.7 per cent for their first increase in 14 months, summing up a total exports worth US$ 1.20 trillion in 2009 compared to US$ 1.17 trillion, the value of total exports from Germany in the same year.
China has roared back to full life while the United States is still smarting from the spasms of the recent economic recession. When China is silently building up its business empire and quietly extending its influence to newer markets of the world, the United States is preoccupied with Iraq, Iran, Pakistan and Afghanistan and the so-called war on terror -- agitating, at the end of the day, the whole Muslim world.
With trade in tatters around the world, Chinese exports fell 20.4% during the first 10 months of 2009, compared with 27.4% for Germany and 21.4% for the U.S. Chinese export enterprises have completely emerged from their all-time low in exports in December 2009, an important turning-point, thanks to strong sales of Chinese goods abroad on the eve of Christmas. It may be recalled that there was a great plunge in demand of Chinese goods in 2008 when thousands of factories in China were closed and millions of Chinese labourers had to be thrown out of work.
It is estimated that the growth of the Chinese economy in 2009 had settled at 8.3 per cent based on their accelerated economic expansion that reached 8.9 per cent for the third quarter of 2009, thanks to a stimulus of US$ 586 billion the Chinese government had injected into their economy for quick recovery from the impact of global recession.
China's good news on economy however could be equally good news for a developed country like Germany or Japan a decade back when China mainly used to supply things like toys for kids and low-tech goods for the middle class people while Germany used to supply to China heavy-duty machinery that were required to produce those low-tech goods.
Chinese goods and household consumables were of high demand in both developing and developed countries because anything Made-in-China was known as the cheapest, and also the shoddiest, in the world. China used to provide manufactured goods at very low prices. The cost of Chinese manufactures used to be typically 30-50% lower than the cost would be if the same product were made in the West. But the scenario has changed.
China has now switched to high-tech business leaving the low-tech affairs for countries like Bangladesh and Vietnam to take care of. Of late, it is no more feasible to outsource cheap consumables in China as wages in China have gone up forcing up manufacturing cost. This means it is now possible for other countries like Bangladesh to undercut price the way China once did to allure buyers in the West. Now perhaps is the time to spread the phrase that 'anything Made-in-Bangladesh is the cheapest in the world'.
Mere 'buying and selling favourite stocks' is nowadays deemed outlandish in China. China is now eager to turn Shanghai into a financial hub as smart as those in Hong Kong and New York. To lure Wall Street executives China is creating 'stock index futures' for investors to make financial bets through trading on margin and short selling, a modern tool for an investor to make profit from an expected decline in the price of securities---the latest fad of hedging by using financial instruments like derivatives.
The unprecedented development in China has paradoxically been a double-edged sword, because lives of millions of people have improved dramatically in many ways, but at the same time China is beset with a myriad of social problems and tinged with some ethical disgraces.
China is on top not only in exports or in car making, the country is also the world's biggest polluter for its carbon emission entering the atmosphere from thousands of its factories and also from the lungs of 1.4 billion people which is one-fifth of the world's humanity.
It often occurs that a Chinese company takes on a manufacturing contract at such a low price that the company must have to make loss, let alone profit. But, the company compensates the loss and makes profit. It is alleged by the economic rivals of China that they duplicate and sell the same product under a new brand-name to buyers in other countries, particularly in the third world. Such duplication does not constitute copyright infringement as long as the products so made bear a different brand-name. That is why on the top floor of Eastern Plaza at Hatir Pool in Dhaka you can buy for Taka 1,000 a cute mobile phone set with an unfamiliar brand-name which is in no way less smart than a Motorola phone set selling at Taka 35,000. But envious competitors in the West call such Chinese practice of duplication a clear piracy.
What however greatly vexes the traders and the statesmen alike in the West is that Beijing keeps its currency, the Yuan, always undervalued. The US dollar's weakness against the euro and some other currencies pulls down the Yuan in markets that use them and makes Chinese goods even more attractive there, adding to China's mountains of trade surplus.
Since 1978, China started emerging as a country to reckon with when Mao's successor Deng Xiaoping and other successive leaders focused on market-oriented economic development for China. Now China is poised to take the leadership of the world, at least the economic world if not the military or the political.
With China soaring high economically, the Chinese people are purchasing costly cars, luxury goods, leisure items and other totems of materialism in the urban areas while millions of Chinese in rural and remote areas are still eking out a tough living under the curse of acute poverty and under the wrath of tight political control---a clear symptom of cultural and societal shift away from the values that used to be espoused by communism and also an obvious shift away from the laissez-faire approach espoused by capitalism.
(Maswood Alam Khan is Editorial Consultant of The Financial Express. He can be reached at e-mail: maswood@hotmail.com)
China overtook the United States as the world's leading exporter of ICT goods such as mobile phones, laptop computers, digital cameras etc. in 2004, passed Germany as the third-largest economy in 2007 and surpassed the United States not only as the biggest auto maker in the world but also as the world's biggest local market for cars and vans in 2009. And on 9 January 2010, the world heard the news that China overtook Germany as the world's top exporter in December 2009.
By 2010, economists believe, China is poised to dethrone Japan and occupy the throne as the second-largest economy in the world. Then, it is perhaps only a matter of time before China, if the present trend continues, will topple the United States to climb up all the way to be on top of Mount Everest of the economic world.
The newest sign of China's rise as a global economic force emerged when its December 2009 exports jumped 17.7 per cent for their first increase in 14 months, summing up a total exports worth US$ 1.20 trillion in 2009 compared to US$ 1.17 trillion, the value of total exports from Germany in the same year.
China has roared back to full life while the United States is still smarting from the spasms of the recent economic recession. When China is silently building up its business empire and quietly extending its influence to newer markets of the world, the United States is preoccupied with Iraq, Iran, Pakistan and Afghanistan and the so-called war on terror -- agitating, at the end of the day, the whole Muslim world.
With trade in tatters around the world, Chinese exports fell 20.4% during the first 10 months of 2009, compared with 27.4% for Germany and 21.4% for the U.S. Chinese export enterprises have completely emerged from their all-time low in exports in December 2009, an important turning-point, thanks to strong sales of Chinese goods abroad on the eve of Christmas. It may be recalled that there was a great plunge in demand of Chinese goods in 2008 when thousands of factories in China were closed and millions of Chinese labourers had to be thrown out of work.
It is estimated that the growth of the Chinese economy in 2009 had settled at 8.3 per cent based on their accelerated economic expansion that reached 8.9 per cent for the third quarter of 2009, thanks to a stimulus of US$ 586 billion the Chinese government had injected into their economy for quick recovery from the impact of global recession.
China's good news on economy however could be equally good news for a developed country like Germany or Japan a decade back when China mainly used to supply things like toys for kids and low-tech goods for the middle class people while Germany used to supply to China heavy-duty machinery that were required to produce those low-tech goods.
Chinese goods and household consumables were of high demand in both developing and developed countries because anything Made-in-China was known as the cheapest, and also the shoddiest, in the world. China used to provide manufactured goods at very low prices. The cost of Chinese manufactures used to be typically 30-50% lower than the cost would be if the same product were made in the West. But the scenario has changed.
China has now switched to high-tech business leaving the low-tech affairs for countries like Bangladesh and Vietnam to take care of. Of late, it is no more feasible to outsource cheap consumables in China as wages in China have gone up forcing up manufacturing cost. This means it is now possible for other countries like Bangladesh to undercut price the way China once did to allure buyers in the West. Now perhaps is the time to spread the phrase that 'anything Made-in-Bangladesh is the cheapest in the world'.
Mere 'buying and selling favourite stocks' is nowadays deemed outlandish in China. China is now eager to turn Shanghai into a financial hub as smart as those in Hong Kong and New York. To lure Wall Street executives China is creating 'stock index futures' for investors to make financial bets through trading on margin and short selling, a modern tool for an investor to make profit from an expected decline in the price of securities---the latest fad of hedging by using financial instruments like derivatives.
The unprecedented development in China has paradoxically been a double-edged sword, because lives of millions of people have improved dramatically in many ways, but at the same time China is beset with a myriad of social problems and tinged with some ethical disgraces.
China is on top not only in exports or in car making, the country is also the world's biggest polluter for its carbon emission entering the atmosphere from thousands of its factories and also from the lungs of 1.4 billion people which is one-fifth of the world's humanity.
It often occurs that a Chinese company takes on a manufacturing contract at such a low price that the company must have to make loss, let alone profit. But, the company compensates the loss and makes profit. It is alleged by the economic rivals of China that they duplicate and sell the same product under a new brand-name to buyers in other countries, particularly in the third world. Such duplication does not constitute copyright infringement as long as the products so made bear a different brand-name. That is why on the top floor of Eastern Plaza at Hatir Pool in Dhaka you can buy for Taka 1,000 a cute mobile phone set with an unfamiliar brand-name which is in no way less smart than a Motorola phone set selling at Taka 35,000. But envious competitors in the West call such Chinese practice of duplication a clear piracy.
What however greatly vexes the traders and the statesmen alike in the West is that Beijing keeps its currency, the Yuan, always undervalued. The US dollar's weakness against the euro and some other currencies pulls down the Yuan in markets that use them and makes Chinese goods even more attractive there, adding to China's mountains of trade surplus.
Since 1978, China started emerging as a country to reckon with when Mao's successor Deng Xiaoping and other successive leaders focused on market-oriented economic development for China. Now China is poised to take the leadership of the world, at least the economic world if not the military or the political.
With China soaring high economically, the Chinese people are purchasing costly cars, luxury goods, leisure items and other totems of materialism in the urban areas while millions of Chinese in rural and remote areas are still eking out a tough living under the curse of acute poverty and under the wrath of tight political control---a clear symptom of cultural and societal shift away from the values that used to be espoused by communism and also an obvious shift away from the laissez-faire approach espoused by capitalism.
(Maswood Alam Khan is Editorial Consultant of The Financial Express. He can be reached at e-mail: maswood@hotmail.com)