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Global benefits from China's booming economy

By George Gu - posted Thursday, 13 January 2005


China's sudden emergence onto the global stage is causing much debate. To some people, its development will mean Chinese domination of the 21st century. Historians claim that a new world power will alter the world balance, and could lead to new conflicts.

But is a prosperous China good news or a disaster in the making? The truth is that a rising China will benefit the entire world, not just China. China's expanding economy is creating a new global engine of growth. Today, China has become the biggest frontier market as well as global manufacturing centre, which has numerous direct benefits for the outside world.

First, consumers can get cheaper products than ever before. China now produces a vast range of cheap products. This offers new choices for global consumers and it saves them significant sums of money. Why would anyone pay $200 for a microwave oven, when he get one made in China for $50? How many people want to shop for the most expensive products? Maybe 1 per cent? But 99 per cent of us are not as rich as Bill Gates or George Soros. Most of us can get by without a Rolex watch, which is why Wal-Mart turns over $260 billion in sales.

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Second, all sorts of new opportunities emerge as China’s economy expands. The world is economically connected more than ever before, producing more wealth for the world as a whole. In fact, many nations can be involved in the manufacture of a single product. Not one single nation dominates. For example a TV set made in China, may have chips from Europe, Japan or the US, metals and raw materials from Latin America and Australia, and other components from a number of developing nations. In fact, international multinationals make more profit than the Chinese manufacturers. For every DVD made in China, the foreign technology patent holders charge at least $5. The Chinese manufacturers make 50 cents. Chinese businessmen say they make less money making DVDs than selling vegetables on street corners. Wal-Mart purchases goods worth about $15 billion from China. But the tens of thousands of Chinese suppliers combined can make less than 5 per cent of Wal-Mart’s profits.

China's development is creating a new engine of growth. China’s booming economy means increasing domestic consumption. In 2004, international players sold around $550 billion to China, well over the $410 billion for 2003. This Chinese buying could reach $1 trillion within five years.

In China’s stores, foreign brands are countless. When a consumer wants a washer, he is confronted with an array of choice: Sharp, LG, Siemens, Electrolux, Hitachi and Whirlpool, among others. Moreover, he will need to choose which store to go to: Makro, Justco, Correfour, Wal-Mart or PriceSmart are just some. There are about 300 foreign retailers in China now and they are following each other very closely and quickly adding new mega stores. More international retailers are on their way to China. A booming Chinese retail economy is a gold mine.

Japan is coming out of its economic slump significantly aided by its increasing exports to China. In fact, in the last few years it has risen by more than 50 per cent.

Without China, Motorola, Samsung and Nokia would be 20 per cent smaller. Indeed, China has saved their fortunes. They are grateful to the 330 million Chinese mobile users (in 2004). And according to their projections, this market will jump to 500 million by 2007. India has only 10 million mobile handsets, but it takes only two months to get them in China. How could any telecom player ignore China?

The benefits don’t stop there. Today, the world is more economically connected, but world politics lags behind. The cold war ideology is still much alive and continues to block the road leading to more global sharing and commonwealth as well as joint responsibilities. The alternative is terrible for all. If China stays in poverty, would the rest of the world benefit?

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In short, 21st century belongs to the whole world. China can only wish to, share its progress. This is a sharp departure from the past. Europe’s previous global reach led to dozens of colonies and the suffering of countless people around the world. The rise of Japan and Germany led to bloody wars in the past. But instead a developing China offers opportunities for the world.

Meanwhile, the average Chinese citizen is delighted to exchange ideas and dreams with others. He is not afraid to compete and he dearly wishes China to be as open as possible. He is eager to meet other nationals in China and beyond. For him, becoming an equal partner in the world is much more significant than being number one or number fifty. He would be as happy as a bird if his hard work is noticed by others.

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This article is based on an interview given by Dr George Gu in December 2004. The transcript is available on Gurusonline.tv.



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About the Author

George Zhibin Gu, a business consultant based in China, is an author of several new books on China and globalisation, including: China and the new world order, China's global reach, and Made in China. He can be reached at gzb678@yahoo.com.cn.

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