The more interesting challenge from China
Barnett
ARTICLE: "Resilience in the face of insecurity," Quentin Peel, Financial Times, 24 January 2007, p. 1.
ARTICLE: "The Global Question: Who Needs the U.S.? Vibrant Asian and European economies may test the theory that when America sneezes, the planet catches a cold," by Peter Gumbel, Time, 29 January 2007, p. 48.
COVER STORY: "The Chinese Century: Already a commercial giant, China is aiming to be the world's next great power. Will that lead to confrontation with the U.S.?" by Michael Elliott, Time, 22 January 2007, p. 32.
BRIEFING: "The problem with Made in China: China is choking on its success at attracting the world's factories. That has handed its Asian neighbours a big opportunity," The Economist, 13 January 2007, p. 68.
ARTICLE: "China Opens Door to UBS: Armed With a Set of Licenses, Firm Controls Its Own Destiny; Beijing Still Wary of Outsiders," by Kate Linebaugh, Wall Street Journal, 22 January 2007, p. C1.
ARTICLE: "Hong Kong and Shanghai Duel for Financial Capital: Extraordinary Lobbying for China's Favor," by Keith Bradsher and David Barboza, New York Times, 16 January 2007, p. C3.
ARTICLE: "Report Seeks Sarbanes Easing: Bloomberg, Schumer Offer Plan for New York To Remain Market Hub," by Aaron Lucchetti, Wall Street Journal, 22 January 2007, p. C3.
The world really has been amazingly resilient in economic terms over the post-Cold War era.
Growth rates of 2-3% from 1990 -1993, then 4% average from 1994-1997, a dip to just under 3% in 1998, then 4-5% 1999-2000, 2001 was 2.5%, then 2002 back up to 3%, then 4-5 percent since.
Not a whole lot to complain about in that record, really, except it could always be more even and more evenly spread geographically.
What's most interesting of late in the development of this expanding global economy is that America no longer plays the role of sole economic engine that drives this train. For the first time in history, America slumps somewhat and because Europe recovers and Asia is booming, this matters not. An American slowdown that doesn't equal a crash for the rest of the world. Suddenly, the American consumer isn't the key to everything, even through the U.S. still accounts for between 25-30% of global GDP.
So the cooling of the American housing market doesn't present the doomsday threat predicted (Gosh, I'm always so shocked when the predictions of crash! and the End of the world! don't come true!).
So the old Trilateral no longer rules. Take that, conspiracy buffs everywhere!
"(Time) The old industrialized-world triad of the U.S., Japan and Western Europe no longer dominates to the degree it once did. China is close to snatching the No. 3 slot on the list of the world's biggest economies away from Germany, and India and South Korea are set to join the top 10 within a decade. India's GDP has expanded by $350 billion in the past six years--equal to the entire economy of the Netherlands in 2000. Once moribund countries such as Argentina and Russia [both of whom experienced IMF-regulated sovereign bankruptcy proceedings in the last decade, I like to note] are doing much of the heavy lifting today. According to the World Bank, developing nations collectively grew about 7% last year--more than twice as fast as high-income countries. They now account for 49% of the world economic output, up from 39% in 1990."
Clearly, the world would suffer mightily if America tanked, but hey! That's a lot more cushion in the global economy than we've ever had since WWII.
Fascinating factoid: "Today only 16.5% of Asia's exports are sold in the U.S., down from 25.5% in 1993."
So do we declare the Chinese century? Yes and no. There is an economy within China that's rapidly gaining ground on the U.S. But there's also an entire Latin America of poverty there--and then some.
Still, the world is thanking China for it's rise, notes Time's Michael Elliott:
"The railroad station in the Angola town of Dondo hasn't seen a train in years. Its windows are boarded up, its pale pink façade crumbling away; the local coffee trade that Portuguese colonialists found long ago is a distant memory, victim of a civil war that lasted for 27 years. Dondo's fortunes, however, may be looking up. This month, work is scheduled to start on the local section of the line that links the town to the deep harbor at Luanda, Angola's capital. The world will be done by Chinese construction firms, and as two of their workers survey the track, an Angolan security guard sums up his feelings. "Thank you, God," he says, "for the Chinese."
That sentiment, or something like it, can be heard a lot these days in Africa, where Chinese investment is building roads and railways, opening textile factories and digging oil wells. You hear it on the farms of Brazil, where Chinese appetite for soy and beef had led to a booming export trade. And you hear it in Chiang Saen, a town on the Mekong River in northern Thailand, where locals used to subsist on whatever they could make from farming and smuggling--until Chinese engineers began blasting the rapids and reefs on the upper Mekong so that large boats could take Chinese-manufactured goods to markets in Southeast Asia. "Before the Chinese came here, you couldn't find any work," says Ba, a Burmese immigrant, taking a cigarette and Red Bull break from his task hauling sacks of sunflower seeds from a boat onto a truck bound for Bangkok. "Now I can send money back home to my family."
Then Elliott goes on to list the places where the Chinese flex their diplomatic muscle and presence: Angola, Australia, North Korea, Russia, Central Asia, Europe, Latin America, Lebanon, Sudan, Iran, and so on and so on.
So yeah, Congress is getting jacked, and so is the Pentagon and a lot of China hawks there. "This must be stopped," we are told. "China is getting too much influence, plus it works with dictators and doesn't have enough freedom back home!"
Go get 'em, Mr. Lantos. But don't expect too much in the way of a response. China's basically a nut on non-interference, and given their recent centuries of exploitation and domination and abuse by the West, who blames the Chinese for having this chip on their shoulder?
And when you add in that amazingly number of still desperately poor within their borders, who faults them for pushing so hard to grow? Development experts will tell you that 90% of the poverty reduction in the last couple of decades was China and India alone. What's more important to us? Growth or instant democracy? Especially when we know so well from our own history that rising income is the key to freedom, and when it goes, so to goes the freedom--faster than you think (read your Benjamin Friedman).
Can China do better around the world? You bet. Who's gonna make them? Nobody.
Who's gonna help them? Hmmm. That would take a superpower will real vision, and I just don't see that generation of leaders among our ranks right now. No, I see aging Boomers and scared old white men who want to fend off the future they don't understand and so largely fear.
But that just says China's evolution may well depend on our political evolution.
Must we fear the "big" Chinese military build-up, that rise of 300% in the past few years alone!
Remember, as Elliott points out, that China's military spending was 1.08% of its GDP in 1995 and is up to only 1.55% in 2005. We spend 3.9% and our economy is more than five times bigger than China's.
Must Taiwan remain the Big War sizing scenario that divides us militarily?
"China," says Huang Jing of the Brookings Institution in Washington, "is now basically on the same page as the U.S. when it comes to Taiwan. Neither wants independence for Taiwan. Both want peace and stability."
And China's not having the "vast sucking sound" effect that many predicted it would for the rest of Asia, drawing all the FDI and all the manufacturing and all the jobs from ASEAN, for example. Instead, China's becoming a big Germany of Asia that grabs the biggest share but also makes everyone around them richer by extension. After all, it can suck up only so much FDI, so the rest gets diverted to its neighbors, like Intel's investment in Vietnam.
But of course, most companies are really going to China to access that burgeoning domestic market. Cheap labor is nice, but consumers are the best.
That's why the banks and financial houses are all flocking to China, UBS Securities being the first of the lot to come armed with all the necessary licenses to trade and underwrite securities. As the WSJ argues, the timing is perfect. Markets in China sit at record levels, and their marketized value just topped $1 trillion.
So look at the new line-up of IPO volume markets:
1) Hong Kong
2) London
3) NYSE
4) NASDAQ
5) Amsterdam
6) London AIM
7) Moscow
8) Frankfurt
9) Shanghai
10) Tokyo
Wow! HK on top and Shanghai now in the top 10, and Moscow sitting at 7! That's some amazing shifts.
Frankly, it's that reordering that's pushing Bloomberg and Schumer to seek a relaxation of some of Sarbanes' rules: they fear New York will start dropping relative to the New Core hubs.
Why this long recitation of facts and figures and trends?
It's important for people to recognize that China's rise portends a host of challenges, but the ones that count are all financial or economic, not military. In fact, the scariest thing about China's international profile is that its economic connectivity is skyrocketing while its security presence amounts to global free-riding, and that just ain't gonna work. Rather than keeping the Chinese in their place, as this administration has sought with a host of military agreements forged to surround China in a ring, we should be drawing China out, pulling it into a world they need to start defending much like we do.
thomaspmbarnett.com |
