The Second Slice of the Chinese Melon

About 200 years ago, Napoleon Bonaparte returned from China and said, "That is a sleeping dragon. Let him sleep! If he wakes, he will shake the world."

Well, China is wide awake today, economically and strategically. The fastest growing region on the global landscape with an economy that came out unscathed out of the East-Asian Currency Crisis and the SARS epidemic just to bolster its place as the 6th largest GDP in the world. As of 2003, China was the world’s second largest economy—only surpassed by the U.S.—and had the highest growth rate of any major country. And not to mention an open arm welcome into the WTO General Council with a makeover from the World's Factory as the World's Market.

What baffles North American Economists the most is the Chinese economic engagement came with a learning curve so steep its continuing development poses a threat to them? China challenging North America's strong holds of industry & manufacturing comes with a lot of political ‘shock’ and wee bit of economic ‘awe’.

China’s economy opening up to the outside world worries those who fear that country’s huge pool of low-cost labor will drain jobs from the North American shores, and less expensive goods will spark trade problems. China’s untapped market present huge opportunities for North American businesses that would surely outweigh any loss of jobs, but the sort of jobs that had left to China a long time ago were the low-wage, low-skill jobs. Will the day when higher-wage, high-skill jobs are outsourced to China mark the epic struggle pitting the American eagle and the Chinese dragon?

There is a distinction to be made between deepening economic ties, fostering multinational trade and global manipulation by companies for their own vested interests. Outsourcing might be distressing to the system prevailing, unwilling to accept the pace of change. But unlike ever before, North America's impotency to produce timely innovative cutting-edge technologies, ideas and industries is hurting its image.

The real question is how many consumers of the 'Welfare Capitalist Economy' actually see the effects of 'Neo-Imperialist Globalization'.

The achievements on the economic plane of life in North America outstrip progress on the political plane to such an extent that economics and politics have lost their synchronicity. The flattening of the global economic playing field, in cohesion with a bastardized global political plane leaves a fertile ground for the gutters of the world to pool together.

Capitalist ruling classes in North America, have an attitude toward government economic policy that needs to be checked. This should ensure the operations of the Chinese marketers do not impede our ability to create jobs in North America and protect the working people of North America from the tremulous changes of supply and demand.

It should come as no surprise that China, of all the bureaucratized and degenerating workers states, has been able to make the greatest progress toward capitalist restoration. The strategic vision of the Chinese bureaucracy to align themselves with the neo-capitalist entrepreneurs of the globe are responsible in their getting rich and morphing into capitalists while the great majority in China, are suffering a decline in their living standards.

The People’s Republic of China (PRC) has embarked on a pragmatic and outward-looking program of economic development that focuses primarily on exports, foreign investment, technology and closer ties with the West.

The Chinese leadership clearly realizes that domestic development and sound trade expansion rely on stable international economic conditions. China is rapidly becoming the world's biggest "low-cost" manufacturer, flooding the global marketplace with relatively cheap electronics and appliances.

The domestic market in China is rapidly developing, showing every indication of becoming, within as little as another generation, at least as important as the United States as a mass market for global suppliers of everything from computers, cell phones, and other electronic goods to automobiles, refrigerators and other consumer durables. China is already at least as important as the United States in terms of incremental growth in imports.

The Made-In-China world we live exists mainly thanks to the manufacturing plants on the mainland, that take advantage of low wages and high productivity (very high rates of exploitation) and a substantial percentage of China's exports are the fruits of foreign firm production in China (rather than indigenous Chinese firms).

China-"the world's sweatshop" has long been lusted after by multinationals eager to gain customers in the world's most populous domestic economy and to exploit China's natural resources and relatively low cost (and abundant) workforce.

In a world where China's emergence as a major base for foreign firms to assemble manufactured goods;

• Where its influence over the free flow of capital, goods and executive talent across the globe is rocking the delicate balance between economic and military carrot and sticks.

• Where ever-closer political ties have blurred the lines between friend and foe.

• Where North American corporations are willing to sacrifice manufacturing jobs, technology and military security in pursuit of quick profits.

• Where multinational affiliates, these outposts of American capitalism are used by the Chinese to manufacture products exported back to the US thereby creating a trade imbalance.

One begins to wonder the role of China in the North American economy is it one of a ‘strategic competitor’ or is it one of a ‘strategic partner’. Bureaucrats and capitalists on both sides of the mutually incompatible social systems are counter posed to the working class of the world. Be it the world's capitalist countries or the degenerating workers states they outsource to.

East Asian efforts to penetrate the North American industry, to gather innovative technology and sensitive business information, have made headlines in the past. Today the world is changing before our very eyes. Some old rivalries are fading while others are coming to the forefront. Today's friend may become tomorrow enemy and visa versa. This is especially true in the rapidly changing world of shifting political alliances and changing boundaries for economic competition.

Neither China nor North America will ever be a paradise for workers. But workers, like institutional investors, must have the confidence in financial institutions, stock markets and government regulators for an economy to grow.

China is an economy undergoing rapid transformation. Its rapid growth has brought great opportunities and challenges—both for China and for the rest of the world. Some producers see Chinese competition as a threat. They worry about losing market share, about the impact on their markets from highly competitive Chinese exports. That's as familiar a refrain as it is an understandable one.

But China's growth has brought immense new opportunities for exporters—of primary commodities, of manufacturing inputs and of finished goods. China is contributing to the growth of world trade, not displacing it from elsewhere.

And competition from Chinese exports has benefited consumers across the world as well. Let us not forget that competition is one of the great benefits that freer trade brings, even when it forces some painful restructuring for those firms unused to it.

But China, too, is undergoing major and sometimes painful restructuring. It is a large and populous country. It has a cumbersome and inefficient bureaucracy, especially at the local level and in state-owned enterprises. Many of its citizens still live in abject poverty, and the gap between rich and poor has widened. It faces enormous demographic challenges as its population ages rapidly over the next few decades. Its banking system is saddled with bad debts that will, ultimately, have to be written off.

Chinese policymakers are seeking to maintain economic growth at levels that can have an impact on poverty while avoiding inflationary pressures that would ultimately hamper growth. And they are often relying on policy instruments that are at best unreliable in what is increasingly functioning like a market economy.

The challenges for China are not new, of course. The transition we are witnessing today started more than two decades ago. Adjustment is a relatively slow process even in small simple economies—and China is neither small nor simple.

What has changed is the extent to which all our economic fortunes are now linked with those of China. Its sheer size and its dynamism make it increasingly important for global economic growth. With Japan's economy largely stagnant for much of the 1990s, China played a crucial part in sustaining and helping to fuel Asian economic growth. With European growth still lackluster, the opportunities offered by Chinese growth are increasingly important for North America. It is in all our interests that the Chinese economic miracle is sustained.