Made in China -- With Neighbors' Imports
Region Growing Dependent on Giant Market
By Peter S. Goodman
Washington Post Foreign Service
Thursday, February 5, 2004; Page E01
TANGKAK, Malaysia -- With a decisive yank of his long-handled scythe, the worker sliced away a palm frond, then pulled magenta-ripe bunches of fruit down to the soil. The harvest of the Sagil Estates palm oil plantation began its journey to the ports of China, a route that traces a reordering of the global economy.
Workers swept the chestnutlike fruit into woven baskets and dumped it into a cart pulled by a water buffalo. The cart carried the fruit to a truck that hauled it to a nearby mill, where steaming cookers extracted its juices. The resulting oil would be pumped aboard tankers and shipped to points worldwide -- more than one-fifth of it to China. There, it would grease the cooking pots of the world's most populous country, fill the fryers of instant-noodle factories and yield cosmetics and soap.
As China's economy rapidly adds mass, it strengthens its pull on the rest of Asia. Rubber plantations in southern Thailand are filling demand for tires as China's auto industry accelerates by 75 percent a year. Rice farmers in northern Thailand now ship half of their premium jasmine rice exports to China and Hong Kong. Steelmakers in Japan and Korea, supplying the spines of the skyscrapers filling China's cities, now call China their largest customer. Computer chip plants in Taiwan, Korea and Malaysia press to satisfy the demand from the factories of coastal China, which now assemble vast quantities of electronics. And as China seeks to diversify its sources of energy while struggling to meet demand for power, it is tapping oil and gas fields in Indonesia and Australia.
In the United States, Europe and Japan, fretful attention has been trained on the $438 billion worth of goods that China exported last year, provoking talk that its rise as a trade power is decimating manufacturing communities in the rest of the world. But here in Southeast Asia, the focus has largely shifted to the counterpart number -- the $413 billion worth of goods China imported last year, with the region's economies capturing a disproportionate share of the spoils.
Last year, Malaysia, Thailand, Singapore and the Philippines all saw exports to China swell by more than 50 percent, helping to change perceptions of China from potential threat into a land of opportunity. But the shipments also create some new concerns: Southeast Asia's dependence means that its own growth could be vulnerable if China's economy cools. And as Chinese manufacturing grows in sophistication, it likely will eat into the flow of finished products those countries send directly to the United States, Europe and Japan.
For now, the biggest problem is simply keeping up with demand as China's relentless industrial expansion absorbs larger quantities of material. During the first nine months of 2003, China bought more than $15 billion worth of machinery and transportation equipment from Southeast Asia, according to Goldman Sachs, a leap of more than 70 percent from the same period a year earlier. Over the same period, China's imports of minerals, oils, chemicals, plastics and rubber from Southeast Asia jumped by half, to $6.4 billion.
"For 2003, China was our biggest buyer," said Yong Chin Fatt, general manager of the commodities section at IOI Group, the Malaysian conglomerate that owns Sagil Estates along with more than 60 other palm oil plantations. Malaysia's shipments of palm oil to China have nearly doubled over the past two years as has the price for its crop. IOI is now planting new acreage in anticipation of greater demand. "We don't see China as a threat," Yong said. "We see China as a savior."
Sarasin Viraphol, executive vice president at the Charoen Pokphand Group Co. Ltd., a Thailand-based poultry conglomerate that was the first official foreign investor in the People's Republic of China, once worried that Southeast Asia could be wiped out by a flood of low-cost goods from the Middle Kingdom. Now, he sees it differently.
"If you make Chinese people richer, they are going to want all those things people want," he said. "Can you imagine 1.3 billion people eating the way Americans eat? There might not be enough chicken in all the world."
In recent months, China's leaders have signaled that they fear the economy could be overheating, tightening credit flowing to the country's fastest-growing sectors such as autos and real estate. They are cognizant that too much investment can spawn a disastrous bubble, a supply glut that eventually sends prices down. If such an unraveling were to occur in real estate, it could force China's banks, already stocked with some $500 billion in bad loans, to write off tens of billions more.
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