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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (17645)	12/4/2004 11:23:26 PM
From: mishedlo	Read Replies (1) \| Respond to of 116555

China Rises Geopolitics: Americans, take note. While we focus on winning the war on terror and managing our troubled relations with Europe, China is fast coming of age in the world economy. It's our next big challenge. Two very different news items Friday underscore China's vault to prominence — a prominence that holds both promise and peril in coming years. In one, IBM reportedly is set to sell its PC business to China's Lenovo for about $2 billion. A mere decade ago, that would have been virtually unthinkable. In the other, China has launched a new submarine class — one capable of carrying ballistic nuclear missiles that will be able to reach virtually any spot on the globe. Two events, one common theme: For China, as for so many other nations, geopolitical might follows wealth — just as it did for the U.S. in the early 20th century and Britain in the 19th. And right now, make no mistake, China is growing at an amazing pace. At current rates of growth, its GDP doubles about every nine years. By comparison, Europe takes about 36 years to double GDP and the U.S. about 20. Since 1980, China's GDP has grown at a blistering 9.5% annual pace to a current $1.5 trillion. By year-end, it'll surpass Italy to become the world's sixth-largest economy. Then, it won't take long to overtake France, Germany and Britain. Expect more announcements like IBM's. Like Japan before it, China is flexing its new-found economic muscle in global financial markets — including buying up foreign companies. The deals China's cutting are coming at a dizzying pace. According to Don Straszheim, economist and chairman of Straszheim Global Advisors, China made just $344 million in outside acquisitions in 2000 — hardly enough to be noticed. This year, it made $7 billion worth. And next year, by Straszheim's reckoning, the figure will double again. Add to that a U.S. trade deficit with China that will exceed $150 billion this year and it's pretty clear: China and the U.S. will have to find a way to get along, or we'll both suffer. With China's frenetic growth will come increased clout — both diplomatic and military. For the U.S., engaged as it is in a global war on terror, an enormous challenge looms. Already, we are wrestling with a China that can say no. We have faced off, for example, with one of China's major clients — North Korea — over its nuclear arms program. So far, China has been less than helpful, supporting North Korea's deranged leader, Kim Jong-Il, in rejecting U.S. demands to get rid of his nukes. China also continues to threaten Taiwan — a democratic nation that has been a U.S. ally for more than 50 years and which now lives under near constant threat of a cross-channel invasion from the mainland. There's more. China continues to sell weapons technology to unsavory, nondemocratic nations around the world, while doing next to nothing to help in the global war on terror. Meanwhile, its $65 billion defense budget is second only to ours, and its army of more than 2.5 million troops is second to none. Already it has replaced Russia as America's chief potential foe. Most of us are so used to watching the rest of the world that we've paid little attention to the challenge that China represents. As the news about its IBM acquisition and nuclear subs sinks in, that's about to end. investors.com