here ya' go . . . <g>
Chinese Economy Returning to Robust
Levels
Asia: A surge in exports is lifting the country, once mired
in recession. Analysts and foreign firms are bullish again.
By HENRY CHU, Times Staff Writer
TIANJIN, China--After wallowing for more than two
years in the economic doldrums, China is back.
Powered by a surge in exports, the Chinese economy
is returning to the robust levels it enjoyed before the
dark days of the Asian financial crisis, which mired this
country in a painful recession.
Through the first half of the year, China logged a
healthy annualized growth rate of 8.2%, according to the
Chinese government. That's up more than a full
percentage point from last year's officially pegged rate of
7.1%, which is almost certainly overestimated. Two
years of nonstop deflation have ground to a halt, while
consumption has picked up.
Most impressively, exports grew 38% compared with
the same period last year, hitting $115 billion in a global
and regional market again hot for Chinese
goods--everything from shoes to baby gear to medical
supplies.
"The economy has rebounded," said Andy Xie, an
economist with Morgan Stanley Dean Witter in Hong
Kong. "And the quality of the growth is much better,"
because it is less dependent on heavy government
spending out of Beijing.
Weak spots remain, such as excess inventories
affecting 80% of the country's products, continued
layoffs in flagging state-owned enterprises and price
wars for certain goods such as televisions.
But with almost all leading indicators on the rise, and
with Chinese entry into the World Trade Organization
expected by year's end, analysts and foreign firms have
returned to being bullish on the world's biggest
developing economy.
At the leading edge of the pack is Motorola, already
China's top supplier of mobile phones.
Last week, the telecommunications giant announced
it was both reviving and expanding a massive high-tech
project in Tianjin that had been on ice since 1998.
Work is resuming on a $1.5-billion wafer fabrication
plant that sat as an empty shell for two years, when the
regional slump and a wider downturn in the
semiconductor industry forced the company to put off
the facility's completion while nursing its wounds.
"It didn't make good sense for us to keep putting
money into that" during the decline, spokesman Scott
Stevens said.
Now, the capacity of the new chip-making plant has
been increased to meet greater-than-expected demand.
That, plus a $400-million expansion and restructuring of
the company's manufacturing complex, pushes
Motorola's overall investment in China to $3.4 billion,
making the company the largest foreign investor in
China.
"This industry is like a roller coaster. It ramps up
really fast, like flipping on a light switch . . . and then
there's a glut because economies fluctuate," Stevens
said. "For us, the China picture was one where the
leaders of the company said, 'We can either avoid that
market or invest heavily and take advantage of the
opportunities.' We would avoid it if we think it's too
risky."
Motorola's present site dominates the special
technological development area in Tianjin, a former
foreign entrepot still graced with colonial architecture
about two hours' drive from Beijing.
It's an American factory with Chinese characteristics.
On the road outside, a huge triptych of billboards
displays paintings of smiling Chinese leaders Mao
Tse-tung, Deng Xiaoping and current President Jiang
Zemin. Inside, the gleaming lobby features a plaque
dedicated by Politburo member Li Ruihuan and an
electronic marquee that encourages employees to "create
a new spirit" in achieving customer satisfaction.
About 10,000 employees work here. A portion will
move to the new plant, where chips will be processed--a
first for Motorola in China--and tested, eliminating the
need to import wafers. The company expects the new
facility to create 2,000 jobs over the next three to four
years.
It will not be without competition. Other
multinationals have cast a hungry eye on China's huge
cell-phone market, which analysts expect to more than
triple in the next four years. Japan-based NEC is
investing in two similar foundries, while some
Taiwanese companies are checking out possibilities for
production on the mainland.
Stevens said Motorola recognizes the risk of its
investment in the face of potentially stiff competition.
But "when you've got companies [like Motorola] that
want to become the de facto standard," he said, "you've
gotta let it hang out a bit."
The dangers to foreign investment in this rapidly
changing country can be all too real. In Tianjin, not far
from Motorola, workers at a U.S.-owned packaging
plant took several foreign managers hostage--including
one American--last week to protest looming layoffs. The
incident ended peacefully after nearly two days.
The packaging company had previously been a
struggling state-owned enterprise before being taken
over by the Americans. Across China, state-run
businesses are failing, pushing people out of work in a
land where not long ago employment and welfare were
guaranteed.
Growing unrest over such closures continues to dog
the Communist regime. So does discontent in China's
vast countryside, where peasant farmers have watched
prices plummet and taxes rise.
Analysts say that economic growth of 8% a year is
necessary to provide jobs for those left unemployed by
market-oriented reforms.
During the recent recession, the state embarked on
an ambitious program of investment spending to
stimulate growth, pouring $24 billion into infrastructure
projects. Though at a lower rate, government spending
remains part of Beijing's strategy to keep the economy
humming, especially a loudly trumpeted plan to develop
urban centers in China's poverty-stricken West.
"There is an enormous amount of growth that's
being funded by state investment in the infrastructure
sector," said Laurence Brahm, a consultant in Beijing.
Developing the West, Brahm said, would help China
eventually lessen its reliance on exports as the driving
force of economic growth, as products could be shipped
and sold domestically rather than overseas.
For General Electric, which has 7,000 employees
and 30 entities in China, the pickup in both overseas and
domestic demand has reversed the shrinkage in revenue
the company experienced during the Asian financial
crisis.
"The overall recovery of the region has helped us in
China," said David Wang, who oversees GE's China
operations, which rake in about $1.5 billion in revenue.
Orders for plastics, medical equipment and lighting
are up. Bigger-ticket items, such as aircraft engines and
power plant turbines, have been slower to regain
ground.
But Wang, a frequent traveler, sees the seeds of
recovery for both Asia and GE in the crowded flights
that once again ply the skies, as business in the region
comes back to life.
"It used to be that you could go to the airport and
buy a ticket" on the spot, he said. "Now you have to
book ahead again.
"It's a great sign for us," he said. "That means they
need more airplanes"--and the engines that go in them.
* * *
China's Prospects Brighten
China may be leaving behind the dark days of the
Asian financial crisis. The government reports GDP
growth through the first half of the year is a healthy
8.2%. Exports grew by 38% compared with the same
period last year. The inflation rate is forecast to stay at
0.5% for the year. With the country's entry into the
World Trade Organization expected by year's end,
analysts and foreign firms have returned to being bullish
on the world's biggest developing economy.
* * *
Exports and Imports Climb ... (In billions of U.S.
dollars)
Projected exports for 2000: $223.9 billion
Projected imports for 2000: $183.9 billion
* * *
... and Gross Domestic Product Shows a Rebound.
(Percent change from previous year)
Annualized rate through first half of 2000: 8.2%
Sources: International Monetary Fund, Chinese
government
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