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Strategies & Market Trends : China Warehouse- More Than Crockery -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2301)	12/30/2003 12:13:49 PM
From: RealMuLan	Read Replies (1) \| Respond to of 6370

EDITORIAL:China's economic might -------------------------------------------------------------------------------- Beijing should keep its `xiaokang' policy in mind. China's emerging economic clout is on the minds of many people these days. When Chinese Premier Wen Jiabao visited the United States in early December, a welcome banquet held in a Washington hotel was attended by hundreds of guests. The enormous turnout indicated the high expectations within the American business community of beefing up U.S. exports to China, which has promised to curb its current-account surplus. The United States is not the only country that puts a lot of hope on an expansion of exports to China. Japan's exports to China in the first 10 months of this year surged 34 percent from the year-earlier period, far outstripping the 14-percent growth in imports from that country. Until recently, China faced a barrage of international criticism that it was spreading unemployment and deflation by enhancing the price competitiveness of its exports with low domestic wages and a policy to keep its currency, the yuan, at unreasonably low levels vis-a-vis the U.S. dollar. Now China is treated as if it was the savior of the world economy. What has caused this dramatic change in the world's attitude toward China? Besides Beijing's deft public relations campaign, the realization has spread among the governments and businesses in Japan, the United States and Europe that China is more a promising market and production center offering huge potential benefits for them rather than a threat. China's economy has developed into such a large international presence that it now has a significant direct impact on the global economy. China's vibrant economy, however, is plagued by a slew of homemade problems, such as slow progress in the effort to consolidate inefficient state-owned enterprises, massive bad debts in the banking sector and high jobless rates. The economic disparities between coastal and inland areas, and between urban and rural areas, are only widening, generating a strong sense of inequality among the people. China's real economic growth barreled along at a high annualized rate of 8.5 percent in the January-September period of this year. But the heavy investments in real estate and housing projects that have been driving the breakneck economic expansion have spawned serious concern about speculative bubbles. The investment boom has been fueled in part by a sharp increase in the domestic supply of the yuan due to massive yuan-selling, dollar-buying operations by the People's Bank of China, the central bank, to stop the Chinese currency from appreciating. U.S. Federal Reserve Chairman Alan Greenspan has sounded warnings about the situation, saying there is a growing possibility of the economy overheating and the country sliding into recession. China's spectacular economic growth has been powered mostly by foreign direct investment. So a large chunk of Chinese exports comes from American and other foreign businesses operating in the country. That's why China's current trade friction with major trade partners like the United States is much milder than the one Japan experienced in the 1980s. It should be noted, however, that China's dependence on foreign capital carries considerable risk. Excessive investment and production that surpass demand may turn the boom into a bust, causing huge losses for both foreign investors and Chinese businesses. The SARS (severe acute respiratory syndrome) epidemic that hit China earlier this year awoke foreign businesses operating in China to the danger of concentrating their production in one country. The Chinese government will eventually be forced to allow the yuan to climb against the dollar. That will cause many foreign investors to undertake a serious review of their investments in China. It is believed China is aiming to accomplish a xiaokang society in which most people can enjoy a stable, modestly wealthy life. Beijing is responsible for keeping the nation's economy from overheating. Foreign investors, for their part, should restrain themselves from betting heavily on hyper-growth and gargantuan profits, adjusting their investment strategies to the more modest target of xiaokang. --The Asahi Shimbun, Dec. 29(IHT/Asahi: December 30,2003) (12/30) asahi.com