Market Leader informed
People’s Republic of China is a powerful agrarian and industrial country that develops such traditional sectors of industry as textiles, coalmining, ferrous metallurgy, phosphorus and faience production and has created new sectors such as oil refining, gas, chemical, aviation, space, electronic, machine building, instrument-making. China holds a leading position in the world in terms of coal production, manufacture of cement, mineral fertilizers, steel, power. It has developed modern means of transport. Major seaports include Shanghai, Tianjin with Xingang, Dalian, Guangzhou with Huangpu, Zhanjiang, Qinhuangdao, Qingdao. The country has about 500 domestic and 60 international airlines.
Is the West afraid of China?
No doubt. But this feeling can be characterized rather as anxiety and mounting concern caused by this country’s might. America and Europe have been afraid of Russians alone for the past sixty years (meaning the USSR and, later, the Russian Federation) but those phobias were based on a risk of war. The PRC, on the contrary, scares them with the success of its strategic course that resulted in economic growth and, as a consequence, political influence in the world. What does China have that irritates many advocates of “the western way of thinking”? Experts of the Masterforex-V Trading Academy have pointed to the following factors:
1. First of all, improving economic figures. Now increasingly more people in the west believe that it is China who will emerge out of the global economic crisis as a winner. In 2007 PRC’s positive trade balance was over 10% of its GDP, this year it went down to 5% (because of the crisis). Nevertheless, even these data are tremendous given Chinese production volumes. At the peak of the global economic crisis, in 2009, China’s GDP added 9%, while US economy contracted by 2.7%, EU’s – by 4.2%, Russia’s – by 7.9%. Now China is the world’s main exporter (this title was confidently held by Germany until recently) and a country with the largest gold and foreign currency reserves. Chinese stock markets and real estate prices invariably grow. Robert Fogel, an economist at the University of Chicago and winner of the Nobel Prize, believes that PRC’s share in global GDP will reach 40% by 2040 and the United States will be left with only 14%. In terms of absolute figures, according to Mr. Fogel, Chinese GDP will approach a staggering amount – 123 trillion dollars – by 2040. “This means economic hegemony", - states the researcher. “China will build TEN cities the size of New York by 2025", - Business Insider tells its readers. Of course, this can’t be taken lightly.
2. Growth in people’s wellbeing. Common citizens of the PRC become richer every year. The stereotype of a poor Chinese worker ready to drudge day and night for food is being swiftly ruined. About 400 million people in this country have stepped above the poverty line over the recent years. Unlike in the past (at least for two previous decades) when China was primarily focused on development of its physical infrastructure in an attempt to produce as many products as possible keeping workforce costs at a minimum, its priorities have somewhat changed. Modernization of production and the need to produce higher quality products drive investments in human capital. Today the share of GDP allocated to education has tripled as compared to 1998. The number of college students in the country has grown fivefold, from 1 to 5.5 million. There is an increasing number of highly qualified specialists, including those trained overseas. Salaries and social benefits are growing. General Motors sold two million of its cars in China during the first nine months of the crisis year of 2010 which is the double of the entire 2007 sales. Today China produces and buys more cars that any other country of the world and recently has also become the largest energy consumer. America and Europe dread to think of the time when the Chinese manage to monopolize the sectors of economy and occupations that are believed today to be the exclusive right of the western world. When the banking sphere, showbiz, the services industry pass to Beijing it will mean a true decline of the western world. This country has no doubts that things will be this way. 76% of the Chinese surveyed in 2008 by Pew, a Washington-based public opinion research center, stated that they were optimistic about the future and this figure is higher than in 17 leading nations of our planet.
3. Viability of the existing political system. The very existence of the People’s Republic of China disproves the popular premise that market economy is incompatible with communist ideology. Purportedly, either of the two constituent elements should prevail sooner or later. But the west has been long tired of waiting for a time when China forms a consumer society that will need democratization of the system. It would seem erroneous to believe that economic progress must be coupled with political liberalization. It turns out one can do without it. In the meantime, the Communist Party of China demonstrates an ability to manage large projects such as construction of the most powerful hydropower plant in the world on the Yangtze River or the highest Qinghai-Tibet railway.
4. Independent policies. In terms of currency exchange rates China is governed primarily by its own interests rather than ‘global’ (read: American) ones. Washington is trying its best to talk Beijing out of devaluing the Yuan so strongly against the dollar. Chinese partners are very unwilling to meet such requests. The Chinese currency added 21% against its American counterpart between 2005 and 2008 but Beijing believes further revaluation of the Yuan is premature. Beijing’s opinion carries increasingly more weight on all issues of global policies even though it often contradicts the widely accepted one but should still be taken into account. China’s position on the global financial crisis, currency policies, climate change, Iran, North Korea, Africa, even Greek or Irish debt crisis is now very important. The west is, albeit unwillingly, getting used to these realities.
5. Growing influence on other countries of the world. The PRC is gradually turning into a sponsor of many third-world countries. They have long admired substantial growth of Chinese economy in the context of the authoritarian political regime. Beijing is looking for and finding numerous allies in Africa, Asia and Latin America. Countries that provide the PRC with international support receive, in turn, generous financial aid, given the tremendous currency reserves. Interestingly, this is done directly, over the head of such institutions as the World Bank and the International Monetary Fund. Respectively, loan terms are very favorable for beneficiaries. In return, these countries agree to support Beijing’s international positions that contradict Washington’s stance. So, a second pole of influence is unnoticeably evolving on the planet. Of course, the cold war winners don’t like it at all.
Experts of the Masterforex-V Trading Academy point out a few ‘optimistic ideas’ about China's future most common in Europe and America:• China’s problem is that it has a developing and, at the same time, second largest economy in the world.
• Chinese economy’s progress is very uneven: many regions of the country remain poor.
• Negation of widely accepted rules often results in economic fiasco, as was the case with Japan which used to be a larger miracle in the 1980s than China today.
• Export-driven economic growth leads to long-term instability.
• Modern China's economic growth is based exclusively on state investments while GDP growth figures are backed by nothing at all. In addition, Chinese economic development has substantial misbalances.
• Weak domestic demand (imports went down 11.2% this year). Combined with excessive investments, this factor can create a gigantic economic bubble in this country.
• China’s huge foreign currency reserves (2.4 trillion US dollars) will be of little use as converting them into the Yuan (and, as a result, significantly appreciating the national monetary unit) would amount to killing of the export sector that China’s economy rests on.
• Renationalization of economy using state funds can have no good outcome. State subsidies will affect primarily major businesses (that risk losing competitiveness) while the main producer – small and medium businesses – will have no support left.
• No chance to overcome corruption.
Analysts are trying to offer investors an accurate and unbiased assessment of the situation. Basically, a vast information war ‘for’ and ‘against’ China is now waged in the world. Future global hegemony is at stake.
Survey of Market Leader and Masterforex-V Academy: What do you think:
• The Chinese economic miracle is indeed unique and beyond control of economic laws and, as such, irreversible.
• The Chinese fairytale will invariably end up in economic collapse as one cannot play a common game according to one’s own rules.
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