Posted on 07/01/2005 7:24:55 PM PDT by Sandreckoner
China throws down gauntlet to USA Inc
Frank Kane Sunday June 26, 2005 The Observer
If you want to understand the global economy and feel the pulse of capitalism in the early 21st century, look no further than the $19 billion bid by the China National Oil Operating Company - Cnooc - for Unocal of California. Add a large measure of geopolitical tension, and you have probably the single most important corporate event of the young millennium. The offer - which Cnooc's president Fu Chengyu and his team have been considering ever since rival US oil giant Chevron agreed a takeover of Unocal for $16.5 billion - encapsulates the growing business confidence of China, the land of totalitarian capitalism. Its dynamic economy needs raw materials if it is to continue the eye-watering growth rates of the past few years. Chinese demand has already helped push up global commodity prices, including oil. Now Beijing wants to own the means of production, too. A middle-ranking American oil company will do nicely.
American nerves are already frazzled by the rate at which China is catching it up as the world's biggest economic power. There have been takeovers by Chinese groups of such pillars of US capitalism as IBM's PC business and Hoover. These are serious brands - but not in the same league as an oil company with real, strategically significant assets. West coast senators are already beginning to lobby the President, who must be worried by the prospect of Chinese ownership of a quintessentially American business. (When Japan bought up a chunk of USA Inc in the Eighties, it was regarded as a corporate Pearl Harbour.) Throw in the spat over Chinese textile exports to the US and Europe, which will be the centre of bitter recriminations at the next meeting of the World Trade Organisation, and the import of the Cnooc bid looms even larger.
Americans will not admit it, but they are almost impotent in the face of Chinese financial firepower. The Cnooc bid is in cash, backed by the near-limitless resources of the Chinese state, and in a country like the US, which has always lived by the epigram 'cash is king', it looks hard to beat. Chevron would certainly struggle to match it. That is why the political lobby is already rolling, with much muttering about the 'national security' implications of the proposed deal.
(Notice, however, that such patriotic concerns do not extend to Wall Street. Goldman Sachs and JP Morgan, perhaps the finest names on the Street of Dreams, are advising the Chinese. Morgan Stanley is waving the flag for Unocal, but its fate will probably be decided by the mainly American hedge funds that dominate its share register. The business of America, it seems, is not business, but finance.)
And - to seal American paranoia - China is also a major holder of US debt. Put simply, the US is in hock to the Chinese to such an extent that if all the bills were called in at once, Uncle Sam would be bust. It's not in China's interests to destabilise the world economy at the moment, but circumstances change. Beijing might just like to keep that card - a financial nuclear option - up its sleeve for some future geopolitical crisis.
Corporate America will climb a traumatic learning curve over this bid, and be forced to confront the growing reality of Chinese economic power. For business people elsewhere, the lesson is far simpler: learn Mandarin - now.
But thats 10k times a billion, compared to 40k times 250 million. If those are the numbers, they've already caught us.
"But thats 10k times a billion, compared to 40k times 250 million. If those are the numbers, they've already caught us."
Per-capita GDP in China is about 5500 PPP dollars, or around 7.5 trilion PPP dollars. The use of PPP dollars, especially by the CIA World Factbook, has been a huge bane on people's understanding of economic comparisons. You routinely see PPP valuations cited by journalists and others where they think they're citing actual dollar amounts. It's depressing, and only feeds the China hysteria.
In USD, per-capita income in China only broke the $1000 mark last year and will hit the $3000 mark around 2020.
America's GDP stands currently at about $12.2 trillion. China's is about $1.7 trillion.
I have read it. And I have concluded that we have been attacked on several fronts for years now. The first challenge for the West is to, in our minds, embrace war instead of our continual fear and denial of it. In execution, of course, both Sun Tzu and Von Clausewitz would come in handy.
So he has two degrees, big deal. My MA is in Western Civ. Again, big deal. You don't have to be a historian to think logically (most modern historians don't, btw).
The point is that he's missing something really big here. Yes, the Chinese economy is rapidly growing, and yes, it's going to affect the rest of the planet. The question he fails to address or answer is: what will it do to China itself?
We're not talking about a closed society anymore. We're talking about a nation attempting to make (or take) it's place in the 21st century, and the process by which it's doing so is FUNDAMENTALLY FLAWED.
As Chinese folks begin to become better informed through the new media, their educational, scientific and business contacts, etc, they will, rightfully, demand the other half of the loaf --- which is individual rights. That's a demand that will have to be paid for in blood (the Party will never allow it), and then what happens to this wonderful Chinese economic revolution should that occur?
Except that Clauswitz was wrong....
"So he has two degrees, big deal."
That's my point. He has two degrees, neither of which are related to finance, or business, much less economics. This is par for the course for a great many people who make proclamations such as his in influential forums. At best you may find a former market trader, or even an MBA. You very, very, very rarely find an actual economist writing this sort of thing. You very, very, very often find some sort of "business" person (or journalist) who apparently has no real background for the claims they're making other than that it's the conventional wisdom of the time. But the more they repeat that conventional wisdom, no matter how flawed, the more it sticks with people.
True enough. But still, for a historian you would tend to believe his thinking/writing would have been tempered by his training. I find it astonishing that a historian could miss the connection between political and economic rights, which has only been a mainstay of civilization for the last 10,000 years or so.
Did Japan have five times our population? Bud, if China can light half the fire under it's citizen that we did under ours, it will have 2.5 times the tax revenues.
Try matching a power like that in military, industrial, space... it would be impossible.
Income per capita GDP for China is $ 5,600 (2004 est.)
http://www.cia.gov/cia/publications/factbook/rankorder/2004rank.html
Annual per capita GDP in Shanghai, China's showcase city, remains, at US$3,000
http://www.taipeitimes.com/News/editorials/archives/2005/07/02/2003261913
"Bud, if China can light half the fire under it's citizen that we did under ours, it will have 2.5 times the tax revenues."
If China can do that, it will be after most any of us on this board right now are dead. Most projections for China still hold: By the time she exhausts her developing-economy growth rates she will likely be no larger than the U.S., might be somewhat larger, and may well be a good deal smaller.
The most optimistic projections of Chinese growth (which blow away most other projections) is a Goldman Sachs paper ("Dreaming with BRICs: The Path to 2050"), which pegs average Chinese GDP growth in the 5% range already by 2010-2015, and in the 4% range 2020-2030. By the 2040 she'll be growing no faster than the United States is capable of growing - she'll be a long-developed economy. Exchange rates at that point would be the difference; she simply cannot just "outgrow" us. And even at that point you're looking at a $31,000 per-capita income in China versus an $84,000 per-capita income in the United States. (With China's population being little larger at that point than it is today, and America's potentially, or likely, numbering between 400 and 500 million up from 300 million today.)
If we were starting with half the economy we actually have, yes, we'd be also-rans. That's not the reality.
"Income per capita GDP for China is $ 5,600 (2004 est.)
http://www.cia.gov/cia/publications/factbook/rankorder/2004rank.html "
As I said, PPP valuations, especially their use by the CIA, are a bane, because few people understand how they are figured, what they actually show, and when they can appropriately be used. You are citing PPP valuations. I'll say it again: those are PPP valuations. To over-simplify: You can buy a Big Mac for, say, 20 cents on the dollar in China. That means $1 Chinese is worth $5 USD. That's a PPP multiplier of 5, which turns an $1100 USD per-capita income into a $5600 PPP income, or a $1.7 trillion USD economy into $7-8 trillion PPP -- what the CIA World Factbook lists.
Suppose that Chinese consumer comes to you, in America, and wants to buy your $100,000 product. Are you going to accept $20,000 in payment? Do you take PPP dollars? Did the Australians sign $20 billion gas contracts with China for $5 billion? Do Chinese suppliers purchase raw materials for 20 cents on the dollar?
"Annual per capita GDP in Shanghai, China's showcase city, remains, at US$3,000"
Shanghai is not representative of the per-capita income of China. The last figures I recall for the entire coastal area -- the developed region of perhaps 500 million - was around $1500 USD per capita a few years ago. (And Shanghai was higher than $3,000 - but sources all have minor variations.)
IMF stats list current per-capita Chinese income at $1400. Another paper I read near the beginning of this year pegged likely per-capita a few hundred lower owing to the massive migratory population and unsteady income.
http://www.econstats.com/weo/V015.htm
I swore I was not going to post here anymore. Perhaps I should stop reading posts here. I really hate to get angry, but whew.........
endthematrix - with all due respect, think about your post.
Income per capita GDP for China is $ 5,600 (2004 est.)
Annual per capita GDP in Shanghai, China's showcase city, remains, at US$3,000
How?
Most of China's population live in a peasant life.
Doesn't that seem strange? In fact why is Shanghai even have it's own numbers like Hong Kong? These numbers at inconsistant at best.
"The per capita GDP reached a record US$1,090, suggesting that China's economic development has entered a new era, Li said." From: http://www.chinadaily.com.cn/en/doc/2004-01/20/content_300524.htm which is a government run paper.
"if China can light half the fire under it's citizen"
Do you even understand Communism/Socialism? The goal of the state is not to light a fire under it's citizens. The goal is to make them all equal. 70% of the people in that country live like the people in outback of Afghanistan. The country is an economic basketcase, and an environmental disaster in the works. Have you read about the riots in south China?
Ah yes, another Clausewitz denier.... you have had your day since 1945. Not much longer, though ....
Clausewitz is out-dated.
Might be why they pay English Lit grads 40K a year to teach English over there (with rent paid).
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