Turning Chinese
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Turning Chinese
The country exported manufactured goods worth $326 billion in 2002. In 1980 the figure was $18 billion
When your telephone, your computer, your pocket calculator, your desk and your chair are made in China, "Made in China" can begin to alarm. Many in the West feel their jobs are being taken by multitudes of workers paid in a week the sort of money an American might spend in a lunch hour on fast food and a cup of Starbucks coffee.
A hugely populated, vast, backward and poor country is beginning to enter the world economy after decades in which it chose not to be a player. Its preferred form of development had been communist and autarkic. China kept itself to itself and shut out the outside world. The end of that isolation is one of the biggest developments of the tail end of the twentieth century: a change related to and as important as the demise of east European communism.
China is marching forward, even in a slack world economy. The country exported manufactured goods worth $326 billion in 2002. In 1980 the figure was $18 billion.
It was in 1978 that Deng Xiaoping began the reforms that started to open up China to foreign investment and the world to Chinese goods. Deng's reforms were impelled by a recognition of failure. China was backward, its labor productivity pitifully low and much of its population consequently very poor. Twenty-five years on the first steps have been taken but the journey remains long. By the end of this century, the twenty-first, China is likely to have the world's biggest economy. But so huge will be the population -- even if the current efforts to curb its growth persist -- that the average standard of living is still likely to be low by comparison with the West.
The Organization for Economic Cooperation and Development has just issued a report on China's policy on foreign investment policy, written by Ken Davies of the OECD's staff. That foreign direct investment -- investments in land, plant and equipment by foreigners -- in China is booming is borne out by the report. In 1983 China received less than $1 billion in FDI. In the second half of the 1990s the annual FDI figure ran at over $40 billion. In 2002 the figure was $52.7 billion.
Yet China's relative failure also emerges from the same figures. Per head of population, Japan, Argentina, Mexico, Brazil, Chile have all received much more FDI than China. "The average Irishman benefited from two hundred times more FDI than the average Chinese in the year 2000," says the OECD's Davies.
This may be of small comfort to our average, nervous-about-his-job Western worker. It highlights how much more of an influence on the global economy China will be when the economy has grown further and punches something more like its weight. For the moment the populous giant is still a big baby that finds large obstacles in its way.
The OECD report focuses on policy problems for the foreign investor. China has yet to develop, according to Davies, a "clear rules-based FDI policy." It has restricted lists for foreign investment so that approval for many projects takes a long time. There may also be obstacles to the success of foreign investors even after they gain entry to the Chinese market. "Even when a dominant state-owned enterprise has been partly privatized, there is no guarantee that it will cease to exercise monopoly power," the OECD report says.
Some improvements are likely to be precipitated by the controversial decision in December 2001 to admit China to the World Trade Organization. But many of the weaknesses have deep roots. China's capital markets remain largely closed to the outside world. The "functioning and independence of the legal system," in the words of the OECD, is another problem. And so is government itself. "A more transparent and accountable process of formulating legislation and regulations" is needed, writes the OECD's Davies.
China's inertia is as huge as its size. Along the coast, in pockets where foreign investments have landed, there is change, new attitudes, new technology, new skills, new money, new consumerism. But in tens of thousands of districts and municipalities, especially in the countryside and away from the coast, local politicians are faithful to deeply engrained and often corrupt habits. Taxes may be high and even crippling. Discontent often seems close to boiling over. In Beijing the government worries. The ministries, small and lacking skilled people, can do only so much.
The movement for democracy crushed in Tiananmen Square in June 1989 was also something localized: the preserve of China's tiny minority of highly-educated students. When workers looked like joining the student protests the government reacted brutally. More recently, practitioners of Falun Gong, an exercise and meditation cult by which the government feels threatened, have been fiercely repressed. Communism has been dropped and left by the wayside yet there is no sign that the iron grip of the Communist Party on power might be broken.
The years of dictatorship have many unhelpful legacies. One is a brain drain of the small numbers of highly educated young people. Davies says `the proportion of China's GDP spent on education is well below that of many other developing countries and far too low for an economy that is growing rapidly and become more technologically sophisticated.` And yet social and political change is happening, a small boat far in the wake of the container ship of economic opening.
The climate is different. The press is more open, if not totally so. There is criticism of government and of corruption. The outside world is seen differently and more positively. It is no longer 'bourgeois liberalism' to sport a foreign watch or perfume. Individualism has re-emerged. People choose the clothes they wear. The stifling uniformity of Mao's days has been abandoned.
Meanwhile the West, which has been an agent of this change, welcomes it only partially. 'How many job are being lost to China?' is the question asked, more by workers than by governments. The fear Western workers have is that their corporations are abandoning them in favor of cheap Chinese rivals.
But this view ignores the gains from China's entry into the world. Economics is not a zero sum game. Chinese prosperity will not be bought at the expense of the West or of other Asian countries. Already millions of China's new wealthy minority are taking holidays in the West. It cannot be more than a few decades before China become the world's second largest consumer market, behind only the American one.
Americans themselves ought to welcome that. For one of the United States' chief economic problems in recent years is that its engine has had to propel the world economy, with little help from stalled Japan or misfiring Europe. And when the U.S. engine fails, as it is doing now, Japan and Europe simply weaken further.
But China's emergence from its years as a giant island of lost opportunity gives it dynamism all of its own. The foreign investments that have brought Made in China to the world have also brought profits to the West and cheaper than ever consumer goods to Western consumers. One day it will be the world's growth and prosperity, too, that has Made in China written all over it
By: Ian Campbell
When your telephone, your computer, your pocket calculator, your desk and your chair are made in China, "Made in China" can begin to alarm. Many in the West feel their jobs are being taken by multitudes of workers paid in a week the sort of money an American might spend in a lunch hour on fast food and a cup of Starbucks coffee.
A hugely populated, vast, backward and poor country is beginning to enter the world economy after decades in which it chose not to be a player. Its preferred form of development had been communist and autarkic. China kept itself to itself and shut out the outside world. The end of that isolation is one of the biggest developments of the tail end of the twentieth century: a change related to and as important as the demise of east European communism.
China is marching forward, even in a slack world economy. The country exported manufactured goods worth $326 billion in 2002. In 1980 the figure was $18 billion.
It was in 1978 that Deng Xiaoping began the reforms that started to open up China to foreign investment and the world to Chinese goods. Deng's reforms were impelled by a recognition of failure. China was backward, its labor productivity pitifully low and much of its population consequently very poor. Twenty-five years on the first steps have been taken but the journey remains long. By the end of this century, the twenty-first, China is likely to have the world's biggest economy. But so huge will be the population -- even if the current efforts to curb its growth persist -- that the average standard of living is still likely to be low by comparison with the West.
The Organization for Economic Cooperation and Development has just issued a report on China's policy on foreign investment policy, written by Ken Davies of the OECD's staff. That foreign direct investment -- investments in land, plant and equipment by foreigners -- in China is booming is borne out by the report. In 1983 China received less than $1 billion in FDI. In the second half of the 1990s the annual FDI figure ran at over $40 billion. In 2002 the figure was $52.7 billion.
Yet China's relative failure also emerges from the same figures. Per head of population, Japan, Argentina, Mexico, Brazil, Chile have all received much more FDI than China. "The average Irishman benefited from two hundred times more FDI than the average Chinese in the year 2000," says the OECD's Davies.
This may be of small comfort to our average, nervous-about-his-job Western worker. It highlights how much more of an influence on the global economy China will be when the economy has grown further and punches something more like its weight. For the moment the populous giant is still a big baby that finds large obstacles in its way.
The OECD report focuses on policy problems for the foreign investor. China has yet to develop, according to Davies, a "clear rules-based FDI policy." It has restricted lists for foreign investment so that approval for many projects takes a long time. There may also be obstacles to the success of foreign investors even after they gain entry to the Chinese market. "Even when a dominant state-owned enterprise has been partly privatized, there is no guarantee that it will cease to exercise monopoly power," the OECD report says.
Some improvements are likely to be precipitated by the controversial decision in December 2001 to admit China to the World Trade Organization. But many of the weaknesses have deep roots. China's capital markets remain largely closed to the outside world. The "functioning and independence of the legal system," in the words of the OECD, is another problem. And so is government itself. "A more transparent and accountable process of formulating legislation and regulations" is needed, writes the OECD's Davies.
China's inertia is as huge as its size. Along the coast, in pockets where foreign investments have landed, there is change, new attitudes, new technology, new skills, new money, new consumerism. But in tens of thousands of districts and municipalities, especially in the countryside and away from the coast, local politicians are faithful to deeply engrained and often corrupt habits. Taxes may be high and even crippling. Discontent often seems close to boiling over. In Beijing the government worries. The ministries, small and lacking skilled people, can do only so much.
The movement for democracy crushed in Tiananmen Square in June 1989 was also something localized: the preserve of China's tiny minority of highly-educated students. When workers looked like joining the student protests the government reacted brutally. More recently, practitioners of Falun Gong, an exercise and meditation cult by which the government feels threatened, have been fiercely repressed. Communism has been dropped and left by the wayside yet there is no sign that the iron grip of the Communist Party on power might be broken.
The years of dictatorship have many unhelpful legacies. One is a brain drain of the small numbers of highly educated young people. Davies says `the proportion of China's GDP spent on education is well below that of many other developing countries and far too low for an economy that is growing rapidly and become more technologically sophisticated.` And yet social and political change is happening, a small boat far in the wake of the container ship of economic opening.
The climate is different. The press is more open, if not totally so. There is criticism of government and of corruption. The outside world is seen differently and more positively. It is no longer 'bourgeois liberalism' to sport a foreign watch or perfume. Individualism has re-emerged. People choose the clothes they wear. The stifling uniformity of Mao's days has been abandoned.
Meanwhile the West, which has been an agent of this change, welcomes it only partially. 'How many job are being lost to China?' is the question asked, more by workers than by governments. The fear Western workers have is that their corporations are abandoning them in favor of cheap Chinese rivals.
But this view ignores the gains from China's entry into the world. Economics is not a zero sum game. Chinese prosperity will not be bought at the expense of the West or of other Asian countries. Already millions of China's new wealthy minority are taking holidays in the West. It cannot be more than a few decades before China become the world's second largest consumer market, behind only the American one.
Americans themselves ought to welcome that. For one of the United States' chief economic problems in recent years is that its engine has had to propel the world economy, with little help from stalled Japan or misfiring Europe. And when the U.S. engine fails, as it is doing now, Japan and Europe simply weaken further.
But China's emergence from its years as a giant island of lost opportunity gives it dynamism all of its own. The foreign investments that have brought Made in China to the world have also brought profits to the West and cheaper than ever consumer goods to Western consumers. One day it will be the world's growth and prosperity, too, that has Made in China written all over it
By: Ian Campbell
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