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When you look at the rise of China and the potential economic sphere of influence that it may become we must conclude that there are a host of different components that will make its case. The reality is that it had first appeared that this new China would be problematic to most of the major sophisticated economies of the world. In fact, if we look at China and her growth as a strategic opportunity for American companies to manipulate and bend to their will, we can now see that economies like the United States may not have to take a back seat in terms of the future development of our economic prowess or military strength. Our verbiage is now in economic terms, and should not be taken as brutishness. What we will cover in this paper are some of the factors that are driving the growth in China, the rise of Shanghai and its new global position; is China putting us out of work, the need to sustain this type of growth through energy consumption, and capital good consumptions. These components will either propel the Chinese economy forward or merely strengthen the US economy. Now that we have a definitive idea set on what exactly the Chinese are doing in terms of growing their economy, and what the other major powers are doing to shore up Chinese business relationships, as well as develop emerging markets in the Middle East, Southwest Asia, Africa and Latin America. The main objectives in regards to foreign economic policy is for every major economic power house to create a policy azimuth that incorporates channeling fresh ideas and innovation into "what is arguably the greatest natural resource on the planet",(China Inc, pg 7) and that is the people of China.
What is the engine that is driving Chinese growth?
The main engine that is driving Chinese growth is simply demand and population. The Chinese are concentrating all of their dynamic growth through four different sectors. The main idea for the Chinese is to expand the agriculture business to keep the farm and desert sections of China from hunger and high unemployment. Then they must increase manufacturing, industrials, and the finance sector. The increase in the manufacturing sector alone is what is propelling most of the high end growth in china, and sending real income wages upward. We cannot conclude that wages are sky rocketing, however; we can say that as the personal income of laborers rises, and so does the basic need for luxury items such as better clothes, domestic travel and items such as cars and televisions. So the true question that should be posed is; how in the world does china do it? Well it is quite simple, "China's rapid economic ascendancy over the last twenty-five years is the basic fact of China's huge population". (China Inc, pg 6) This is a country that has 1.3 billion citizens, this number is greater than the entire populations of the European Union, and NAFTA countries combined. To be frank, when you look at this market and the Indian market you will surely find some major comparisons in terms of the size and scope of the populations and the frequency of their consumption habits. The Chinese economy has been dubbed a "low-cost manufacturing machine" (China Inc pg. 7) and these naming rights should not be taken lightly. There population will increasingly become consumers as more manufacturing and production continues to push ahead to China. What many economists fail to realize is that although the Chinese can manufacture so many different products well, many of the nationals cannot afford some of the basic items that they are producing. This objective statement refers to the fact that the United States and some of our allies have a period of time where we can still use novel innovation in order to create a cushion for us to deal with this problem.
The importance of Shanghai and its future imprint on global commerce.
Shanghai is taking a fast hold as one of the world's greatest cities. Shanghai, Beijing, and Hong Kong in fact are three of China's major industrialized cities. The Chinese government has always viewed Shanghai as a progressive city in their empire. Shanghai actually was the most Eurocentric of the Chinese cities up until the 1930's in terms of development and city planning. Whenever you thought of the Chinese pushing towards the future and becoming a superpower this is the city that was on the forefront. Shanghai was once viewed as "one of the world's most important commercial centers together with London, New York, Paris and Tokyo". (China Inc pg.19) This very important Chinese city was actually created by other countries. The whole intent was for Shanghai to mimic the business activities of the New York's, and Paris's of the world. This city was by British standards going to become the new capitalist empire of the east, and frankly it had become just that. Banks, factories, commercial storefronts, and restaurants began to sprout up all over Shanghai and it had appeared that this was going to be the new Chinese model city. Almost all of this economic growth is located in a district of Shanghai called "The Bund". (China Inc pg 22) Not only was this city a booming port for shipping and admiralty commerce, it was also gaining the lions share of a population shift from the central and more western parts of China. This was until the communist party under then chairman Mao came to power. He began to exert what would become an absolute influence on the mandarin speaking Shanghai. Not only did this once powerful and booming city nearly shut down, just about every Eurocentric piece of the city was ignored. The beautiful aspect to this city is that after the death of Mao, Shanghai had a true resurrection. Buildings like the "Jinmao" (China Inc pg.32), an 88 story Skyscraper, began to appear reasserting Shanghai as a major player on the global commercial scene. Not only are skyscrapers appearing, but the Shanghainese and the Chinese government invested 1.8 Billion into a test train that was created by two German industrial firms, Thyssen Krupp and Siemens AG. This train is actually a precursor to what will become the world's fastest city to city rail link.
Are Chinese factories putting us out of work?
There is a massive up tick in the amount of off shoring that has occurred globally. Many multi national corporations are sending jobs to China at an alarming rate. Our group has considered this to be unfortunate. We originally thought like the average citizen that only American jobs were being lost, and that there was not an economic gain on the American side of this issue. What we found was quite the opposite. First, let's take a look at Menardo, a former business owner from the Philippines. Menardo previously owned his own factory business that produced "Jute Bags". (China Inc pg.6) Menardo used to pay his hourly laborers a handsome $30 dollars a week; and he was pushed out of business because his bags were now being made by Chinese firms, whose employees work harder, longer and for less pay. Secondly, let's look at the strategy that Kate Xiao Zhou describes on page 72. Kate describes the Chinese manufacturing strategy as "One household influences one village; one village affects one district; every village has an industrial smoke stack; every household emits smoke". (China Inc pg. 72) This is a pretty powerful statement. In short what she is describing is that no business is reinventing the wheel, but they are all copying the successful habits of one another while replicating the strategy on a localized scale. This copy cat model has fostered what we believe to be one of the greatest start-up growth stories we have ever researched. What they did, in our opinion was almost communal, they took approximately 80,000 farm households in the Hebei Province and turned them in small localized factories that manufactured acrylics. This collaboration in Hebei netted some 20 million garments that year. Such strategy has turned out to produce nearly 100 million dollars for this section of Hebei. Soon thereafter many other townships started doing the exact same replication model and even until this day, many of these sections of china have become the worlds most efficient and affordable textile producers.
The Chinese will need energy to sustain this growth.
Nothing in life can be sustained without a serious and viable energy source. When you think of energy you must think about a combination related products: electricity, natural gas, coals, and of course oil. In order for China to become a true global leader or superpower they must take the time to invest into the energy sector. The Chinese have to use innovative ways to not only consume energy, but they must find cheaper and alternative methods of production or acquisition by way of energy imports. What we are about to share with you now is the actions taken by the Chinese to improve there energy efficient, and the economic benefits that United States multi nationals corporations have gained from remaining a leading supplier of heavy industrials. The author of the book stated that "In 2004, $24 billion was invested in new generators" (china Inc pg 113). This is truly indicative that these people are taking a very large interest in making sure that they secure enough energy to meet their economies growing demand. This is also a very good thing for Americans and American companies. Firms like AES are active in Chinese power plant management while others like General Electric are selling high end turbine engines and other services that impact the US economy in a positive way. Some even believe that this new market for energy has nothing but dollar signs for some American firms such as GE, where they believe that "urbanizing China is where the dreams of GE shareholders and the Chinese Migrant worker meet."(China Inc pg. 114) Although we may offer a serious competitive advantage, today it is dually noted that American and European companies must act fast. The author believes it is only natural for technology transfers to present Chinese companies the opportunity to mimic the operational strategies of the multi nationals and eventually replace them in the energy production market. Such action should be a natural respond to any company that truly understands the product life cycle and the true nature of capitalism.
The Chinese need for American automobiles.
One great thing that we know abut Detroit is that they truly know automobiles. In fact, not only does Detroit know automobiles, they also know when an emerging market must be tapped to full capacity. Currently the US has three automakers. Two of the three, General Motors and Ford are international automakers, while Chrysler corp. which is owned by Fiat is more of a super regional automaker only selling cars to Canada and Australia. Now lets not be mistaken, Bob Nardelli and his Chrysler team are missing out on what can arguably be stated as the largest new emerging market in the world. The reality is, both ford and GM have the optimal solution in terms of how they were going to reposition themselves as a top flight American automaker. Sales for automobiles in china have increased "63 percent in March from a year earlier" (Kurtenbach, 2010). So lets talk dollars and cents here, the Chinese market has unrivaled market growth potential, in fact the potential is so large that some ascertain the notion that the US may not be able to sustain the demand; "The U.S. market is recovering but cannot match growth in China, where many are still buying their first cars. Demand for bigger cars is growing as families that bought small cars the first time trade up to better, larger vehicles".(Kurtenbach, 2010) What this quote is truly saying is that there is a unique opportunity for our automakers, this is, increase the investment in china by realigning some parts shipping and manufacturing facilities to the Shanghai an Beijing markets and start producing and cutting the lead time on new cars to hit the enormous market. The reality is that, we could integrate a new program that would allow the opportunity to create a hybrid matrix of production and shipping at all three automakers that would reemploy many of the former assembly line workers. Perhaps if we transition and train for some jobs, we can endorse this hybrid and create jobs in both the United States and China in order to satiate the yearning for GM and Ford cars. This might also be a good time for Chrysler to invest in new models and multi national expansion. While the key infrastructure is already in place in Australia, it may present a unique time for Chrysler to increase production in Australia and move these new vehicles to China by ship. Undoubtedly bound to increase the sales and strengthen the beleaguered position of Chrysler while also meeting the rising demand for Automobiles in China.
In sum, we have researched the Chinese economy from three different sources and utilized the collective brainpower of four university student managers. We have talked about a wide depth of issues ranging from energy consumptions and acquisition, to the rise of Shanghai as a new major contributing metropolitan center of economic impact in China and around the world. One thing that our group can concluded is that, the Chinese market may scare the death out of many foreign policy experts and scholars, but it sure is making the American entrepreneur and fortune 500 corporations' executives salivate like a rottweiler ready to pursue a nice meal of a t-bone steak. It appears that the United States economy has no place to go but skyward. It is the option of this team that while we may look at China with great skepticism, we must now acknowledge that a good survivability move for the United States economy and our business interests are to look at this new China as a vessel of enormous opportunity.
Fishman, C. Ted (2005 Simon & Schuster). China Inc: How the rise of the next superpower challenges America and the world. [Paper Back Version 2006], p. 1-21, 21-25, 71-73, 113-114, 118-120, 146-149, 258-266.
Kurtenbach, Elaine. (2010 April 10). China's $7.24B March trade deficit 1st in 6 years. Retrieved from http://news.yahoo.com/s/ap/20100410/ap_on_bi_ge/as_china_trade
Kurtenbach, Elaine. (2010 April 9). China passenger car sales up 63 pct in Mar.