GCHC will soon file an 8k and then follow up with their 10Q's for 2004. This article points out the importance of having one's portfolio stacked with young, reputable China issues.
"China Is Neither Japan Nor the Soviet Union: William Pesek Jr.
Oct. 14 (Bloomberg) -- Of all the mistakes the U.S. is making in dealing with China's rise, the most obvious is this: thinking we've seen this before.
Well, we haven't. Never before has such an underdeveloped economy with such a huge population and history of innovation muscled its way onto the world stage so fast. To say the complexion of the global financial system will never be the same is a vast understatement.
China's rise has rendered the work of John Maynard Keynes, Milton Friedman and even Karl Marx all but irrelevant. Such economists based their work on the advance of Europe in the 19th century and the U.S. in the 20th. If they thought those events were something, just wait for Asia's rise in this one. It's not just China, remember, but India, too.
If the Bush administration knows this, it's not letting on. Depending on whose views you analyze, it seems to see China as either a replay of Japan's rise or the Soviet Union before it collapsed 15 years ago. China is neither, and the U.S. needs to get that if it's going to avoid friction with an economy that may someday dwarf its own.
Snow in China
Japan comparisons are inevitable as U.S. Treasury Secretary John Snow visits China this week. Like Japan, China is pursuing an export-driven strategy and, like the Tokyo of yesterday, it is doing battle with manufacturers around the globe. China also is focusing on developing competitive advantages in specific industries, much as Japan did in electronics and autos.
China, meanwhile, is under pressure to let its currency rise. For politicians in Washington, China is a perfect scapegoat on which to pin their nation's challenges, just as they did with the Japanese in the 1980s. And just as Japan scooped up companies, real estate and art in the 1980s, China is becoming more globally acquisitive.
For all the superficial similarities, China is not a replay of Japan. For one thing, China is looking to bypass the process of domestic company building that preoccupied Japan for decades. That's why you've seen Chinese bidding on companies with established global brands, such as Unocal Corp. and Maytag Corp.
China is No Japan
Even if U.S. politicians are wary of China, many executives aren't. The hand wringing of Corporate America in the 1980s isn't in evidence with China. Companies are relying on its cheap labor and land to pump up profits. Consumers, rather than slapping ``Buy American'' bumper stickers on their cars, are happy to load up on low-cost Chinese goods.
The trajectories are different, too. Fears Japan would swallow up the global economy were more fiction than fact. China, population 1.3 billion and growing, isn't likely to top out as quickly as Japan did, with 127 million people. While much could go wrong, China's economy might surpass the U.S.'s in 30 or 40 years, if not sooner.
Perhaps the biggest difference is openness. Even though it's far less developed than Japan, China is going with a more outward-looking development model. In 2004, says Stephen Roach, New York-based chief global economist at Morgan Stanley, exports and imports combined accounted for 74 percent of Chinese gross domestic product, more than three times Japan's 23 percent share.
That, Roach says, explains why China is resisting a Plaza Accord-like currency adjustment akin to the one Japan agreed to in 1985 and later regretted. China is considerably less wealthy and more reliant on trade than Japan. So if Snow thinks this week's trip to China will result in a yuan revaluation, he's mistaken. China, simply put, is not Japan.
Soviet Comparisons
Comparisons to the Soviet Union are even more misplaced. Perhaps that's inevitable, since communists run China as they once did the Soviet Union. Fears of a U.S.-China Cold War emerged early in President George W. Bush's first term, when he characterized China as a ``strategic competitor,'' scrapping the ``strategic partner'' language of the Clinton years.
More recently, U.S. Defense Secretary Donald Rumsfeld has criticized China for increasing its military spending. Here in Asia, the words ``Cold War mentality'' often crop up in news articles and academic papers on China-U.S. relations.
Yet China is already far more deeply intertwined with the global economy than the Soviets ever were and its embrace of capitalism is far more progressive. China's economy also is more stable and growing much faster than the Soviet Union's ever did.
U.S. Caution
Unlike the Soviet Union, which used fear to bend others to its will, China is using economic diplomacy. It has chosen integration and the promise of robust demand for trading partners' goods over confrontation. China, in part by buying so many U.S. Treasuries, also has made its relationship with the world's biggest economy symbiotic, something the Soviets didn't.
The U.S. should tread carefully here. Few doubt a natural rivalry is developing between the U.S. and China. The need to secure access to energy and commodities alone ensure it. Officials in Washington shouldn't fight China's rise, or try to contain it. Doing so would be futile and counterproductive.
Global powers never give up voluntarily and the U.S. is right to feel antsy about China's potential. As Henry Kissinger, the former U.S. secretary of state, said recently, ``Asia's rise will be a test of U.S. competitiveness in the world now emerging.'' The U.S. can either be part of the Asia-centric economic regime now being created or risk being left out. |
