Wanted: Bulls in the China Shop
By Azhar Javed
'Catch me if you can” are the words fit for China because it is on a long march to capture the world economic markets and develop resources as part of Beijing’s ‘go forth’ policy to ride the globalisation bandwagon. China is emerging as an economic superpower within a decade.
Meanwhile, the world looks at the phenomenon of ‘Made in China’ with awe and ponders over its repercussions the moment the WTO comes into effect.
China is the largest exporter of photocopiers, micro ovens, CD players, which is the 70 per cent of total exports of these products in the world. It exports 50 per cent digital cameras and 20 per cent computers and computer related accessories.
China is also major exporter of meat, cotton, peanut, canola, fruit, iron, coal, cement, fertilizer, cloths, television, toys, auto parts, crockery, stationery, shoes, firecrackers and many other unaccountable goods.
The 1.3 billion population has become an asset for China as the wage advantage and big domestic consumption are attracting investors and manufacturers, specially for multi-national companies to set up their main plants offices, industrial units there or relocate from other parts of the world. By reforming economic policy, China has become the world’s cheapest manufacturing country, which has attracted a substantial foreign direct investments (FDIs).
The World Bank has predicted at least 9.2 per cent growth for China this year (2004), up from 9.1 per cent in last fiscal year 2003.
Chinese organisations are moving up the ladder as their country’s membership of the WTO guarantees them access to world markets. From toys to computer chips, everything is being exported to the rest of the world these days.
China’s economy accounts for about 12 per cent of world output, double its input a decade ago.
Figures released by the Commerce Ministry of China showed that in the first 10 months of this year, China has attracted $53.8 billion in FDIs, up 23.47 per cent year-on-year.
It is amazing to note that three decades ago, China was among the world’s poorest countries with 80 per cent of the population having incomes less than $1 per day. Only one-third of adults were able to read or write. By 2000, China had become one of the fastest economically growing countries in the world with real per capita growth close to 9 per cent per annum between 1980-2000.
Consequently, China’s per capita income doubled every ten years, faster than almost any other country in the world.
China now exports over $500 billion a year and is committed to continue opening up and active participation in economic globalisation.
A study by investment bank Goldman-Sachs predicts China will overtake Germany in economic output by 2008, Japan by 2015 and the United States by 2040. If the Chinese kept up with the pace of growth, they are bound to overtake Britain and France to become the world’s fourth biggest exporter country before the end of 2005. Whereas World Bank admitted that China has already become fourth largest exporter country of the world.
The multinational firms/factories has rushed to China for boost up of their businesses and more profits owing to the cheap labour. The latest is Ford, which announced plan to set up new $1.5billion plant there.
USA the largest exporter of the world has also worried about the growth and development of the China in all fields. In fact, China has captured the US market through floating the goods on cheaper rates.
European countries are facing the challenges of the China products. According to European Union’s executive commission annual “competitiveness report”, EU warns that China is turning itself into a low-cost competitor in high-skill industries”.
The lesson for companies in the West are that they must pour funds into research and development, continually adapts, if they are to fend off the seemingly unstoppable rise of China.
China is the 25-nation EU’s second largest trading partner after the United States. But much of that trade is one-way. From a surplus in 1995 with the EU’s older 15 members, the bloc now has a massive deficit with China of more than 10 billion Euros (13 billion dollars).
The electronics sector in Hungary has notably lost jobs to China, which has poured investment into cutting-edge sectors such as production of dynamic random access memory chips to leapfrog past eastern European rivals.
Whereas Chinese exports of information-technology (IT) goods to the EU-15 countries rose by about 25 per cent over 1996-2002, they soared by more than 50 per cent to the 10 new members over the same period.
China looks set to entrench its dominance in the rag trade when global import quotas are lifted from January, leading to EU warnings that it will safeguard its textiles industry to prevent a flood of Chinese imports.
But the textiles trade provides a case in point for how the EU can respond to the growing might of China, the European Commission report said.
No doubt, time has proved in the past that China remained a true and loyal friend of Pakistan. The economically growth of China is not threatening at all. It does not believe in hegemony or expansionism.
According to a Chinese official who released the latest China-Pakistan trade figures, China is ready and anxious to help Pakistan to boost its exports to China but the Pakistani businessmen have to take the lead and develop contacts with Chinese businessmen. They have been too slow in doing real things except visiting Beijing at times.
These businessmen are only doing business of importing commodities in containers from China whereas they should try to get transfer of technology to set up huge industrial zones in the country.
Unfortunately, the traders and industrialist classes still perceive China as ‘the workshop of the world’. Not much has so far been done to conduct serious research on the country as a potential market for Pakistan’s exports.
Fierce competition, rising costs of production, law and order situation and political uncertainty has put most manufacturers at the end of their wits. All they seek is safe exit from the field.
Some manufacturers, in sectors other than textile, have already shifted their major interests from industry to trade. Instead of planning additional investment, most are more occupied in preserving their already invested money. In such an environment there is little hope that private sector could take a lead to take the trouble and bear the cost of assessing the depth and breadth of the Chinese market for Pakistani industrial or agricultural products.
Pakistan’s exports have been going down day by day while the imports of China from all over the world increased. The latest figures released in Beijing show while Pakistan exported goods worth $561 million to China in 2000, its exports dropped to $537 million in 2002.
In the same two-year period Pakistan’s imports from China jumped from $796 million in 2001 to $1.2 billion in 2002. The prospects of imports from China would expand steadily as the Chinese products are cheaper and their quality is improving steadily. China is making headway in the electronic sphere and moving towards high tech manufactures, which it can sell at very low prices in Pakistan.
Chinese imports are now worth $230 billion and it has a $30 billion trade surplus. And it is not that only the advanced countries can export plenty to China. The US has, undoubtedly, a large trade deficit with China; simultaneously countries like Malaysia, Thailand and South Korea have large trade surplus with China. And if Pakistan goes about it the right way it can export far more to China.
China has so far just been perceived and projected as a country that is willing to assist Pakistan in development of metallurgy in public sector. For the private sector, it is a country that has potential to export both finished products and raw material at affordable prices in abundance.
“We have no interest in destroying any industry in Pakistan. We export on demand. Pakistani traders visit China, they place orders and get their consignments on terms and conditions agreed between trading partners”, contends Mr. Zuo, Vice Counsel, Economic and Commercial Office of the Chinese Consulate. China, he argues, as a policy encourages exports and even gives 15 per cent rebate to producers.
A clear-headed and optimistic paradigm shift can turn the “Chinese threat” into the “Chinese opportunity”. It is upto the business community of our country to plan out their WTO regime strategy wisely.
According to economists Goldman Sachs, China will overtake the US as the world's largest economy within the next few decades. By 2050, it will be signifcantly larger than the US. Also according to Goldman Sachs, Britain's economy will soon overtake Germany's.
World's largest economies in 2050 according to Goldman Sachs.
(US$bn)
1) China - 50000
2) US - 35000
3) India - 27000
4) Japan - 6000
5) Brazil - 5100
6) Russia - 5000
7) Britain - 4100
8) Germany - 3900
9) France - 3700
10) Italy - 3000
http://nation.com.pk/daily/dec-2004/6/bnews1.php
