Sunday, January 25, 2004

Consolidation: this blog is moving ahead

I'm running at this stage about four blog-like operations and that is a bit too much, I discovered, so I'm going to consolidate my China-blogs into one new one: chinaherald.blogspot.com

Do expect here also a strong economic angle, but there will be much more variation. Hope to see you there again. Postings here will basically stop from now.

Saturday, January 17, 2004

What can stop China's growth? - the WTO column

Now at Chinabiz


Ann Arbor, MI - China's economic growth has been hitting headlines over the past few months at least a few times per week. Of course, it is that time of the year when the accounts on 2003 have to be closed and the budgets for 2004 are set, but the tone is remarkably optimistic to put it mildly, compared to even one year ago when SARS held China captive.

We saw exports grow like never before, a record in the official GDP growth of 8.5 percent over 2003 (now we even think that reality might be rosier than the official numbers) and investment bankers are making overtime like they only did during the internet bubble. Meanwhile non-performing loans reduced dramatically with a major recapitalization by the government, opening a way to swift IPOs. Conferences worldwide focus on China: everybody wants to have a piece of the action.

That seems a good moment to look around and for the remaining doomsday scenarios, that were so popular until not so long ago. I have been trying to act as the pessimist - or clown as some might say - but that seems a useful function as the next China craze is in full swing. Fortunately, some of my colleagues at ChinaBiz also have a gloomy take on the future. Up to not so long ago roles were reversed, me being a lonely optimist while the rest of the world thought China was collapsing.

China has gotten much blame from manufacturers and trade unions in the US for cheating them out of work. Much of those arguments only show that those groups are clueless about globalization itself and in general do not make sense.

But what should not be forgotten is that globalization is always a two-edged sword. China is doing very well, partly because export to the US has never been as high as now. China's economy is doing very well, partly because the US is still doing well. This does not have to continue automatically.

The main problem for President George Bush is that the economy is not doing as good as he needs for the upcoming presidential elections later this year. More than ever, President Bush needs an economic upswing, but developments are not really supporting his efforts at this stage.

Even my regular taxi driver here in Michigan agrees with me. Jay is not an ardent follower of the debates on the presidential elections to put it mildly. He lost, like three million other US citizens, his previous job because of the economic downturn caused by the current president and he wants only one thing: no Bush. But when the economy is doing well a few weeks ahead of the elections, most people will forget about years of hardship and three million lost jobs.

Doomsday scenarios suggest that at the present rate of deindustrialization and indebtness the US might become a developing country in 20 years time, with analysts noting that the only superpower has much less leeway to tumble compared to Japan. That might put China ahead of the US in many instances, but it will not all be rosy given its present dependence on the US market. A US with third world wages may also offer stiff competition to the Asian giant.

Fons Tuinstra

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