Chinese economy maturing surely, rapidly
Asian giant will pose both opportunities as well as threats to US
DAVID ARMSTRONG
Posted online: Friday, December 24, 2004 at 0111 hours IST
SAN FRANCISCO, DECEMBER 23: China took centrestage in 2004 as an economic star to reckon with for many years to come.
Ravenous for imports, China gulped huge amounts of raw materials, steel, farm produce and more. Its exports surged, too, rolling up a record trade surplus with the United States. And China strengthened its regional clout by announcing plans to create a sprawling free-trade area with 10 Southeast Asian nations.
Meanwhile, Washington, struggling with a weakening dollar overseas as well as ballooning trade and budget deficits, anxiously asked Beijing to revalue its currency, and US firms complained of rampant piracy of their intellectual property.
Expect more of the same in 2005. According to China watchers, the Asian giant will pose both continued opportunities, thanks to its appetite for foreign investment and a huge domestic market, and threats to US businesses, given its much lower costs and ability to pull jobs from the US and other countries.
In addition, a select handful of Chinese companies is emerging as global players in their own right. This point was made most dramatically early this month, when Lenovo Group, a Beijing company formerly known as Legend Computers, announced a $1.75 billion deal to buy IBM’s personal computer business.
How Washington officials and US business executives respond to China’s economic clout will go a long way in determining the shape of things to come in Sino-American relations.
The first opportunity will come on January 1, when an international treaty that has fixed quotas on textiles since the 1960s will begin to be phased out, ushering in what is expected to be a rush of cheap imports into the US, most of them from China. As both a rival and a partner, China is economically critical to the US. Overall, China was the sixth-largest export market for California in 2002, the most recent year for which figures are available. With sister city relationships between San Francisco and Shanghai and Oakland and the port city of Dalian, transpacific ties are exceptionally strong.
For the US, China ranks No. 3 in exports and imports combined, behind No. 1 Canada and No. 2 Mexico, this country’s NAFTA partners and neighbors. The US imports more from China than it sells, by a 5-to-1 ratio, thanks to China’s growth, low operating costs and cheap currency.
Just as China’s market demand is helping to lift one American industry out of the doldrums, though, it is helping to plunge another one into crisis.
US furniture-makers have seen jobs disappear and factories close as inexpensive, high-quality furniture has started to pour out of China. This, in turn, set off a row with American retailers. Retailers are also clashing with American textilemakers, who are expected to be hit hard by increased imports from China in 2005, when quotas on imported textiles begin to be phased out. —NYT
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