Posted on 02/13/2005 8:14:11 PM PST by risk
CHINA, INC.:
How the Rise of the Next Superpower
Challenges America and the World
By Ted C. Fishman
Scribner, $26, 352 pp
Reviewed by KRIS HUNDLEY
If you've seen the price of DVD players go down and the price of gasoline go up, you have been affected by the biggest economic revolution of our time: China.
In China, Inc.: How the Rise of the Next Superpower Challenges America and the World, Ted C. Fishman tries to capture the enormous impact of that nation's stunning evolution over the past two decades from an industrial backwater to global powerhouse.
Fishman, whose work on China has appeared in the New York Times Magazine, knows how economics works. A former floor trader and member of the Chicago Mercantile Exchange, he ran his own trading firm until 1992.
After becoming a journalist, he wrote extensively about globalization for publications like Worth, Money and Harper's. Increasingly, that meant writing about China, where laws of supply and demand operate on a megascale at hyperspeed.
On the supply side are a seemingly endless supply of workers and an unprecedented flood of foreign capital and expertise. On the demand side are retailers, manufacturers and consumers worldwide craving ever-lower prices. Throw in wild cards like rampant corruption, unrepentant counterfeiting and a currency that moves in lockstep with the dollar. Add a government that places a premium on maintaining stability in the face of the biggest social upheaval in history. Then try to make sense of it all.
Fishman, 46, who spent several months in China in 2003 and 2004, does an impressive job of capturing the creative chaos that is China today. He starts his journey in Shanghai, on a tourist boat down the Huangpu River. "The banks of the Huangpu River," he writes, "do not just bend. They mind-bend."
On one side, a visitor sees the Bund, the commercial district that Western powers built beginning in the mid 19th century based on trade and opium. Filled with replicas of buildings from the great European capitals, the Bund looks like a movie set that has been jolted back to life after decades of neglect.
Just across the river in Pudong, rice paddies have given way to scores of gleaming skyscrapers, each one seemingly taller than the next. Home to nearly 6,000 foreign-funded companies -- and underwritten by more than $12-billion in public money -- Pudong, Fishman says, "is the propaganda of hope."
"So far optimism is keeping it up," he writes. "And a whole social apparatus exists to make sure that optimism itself stays up."
But beyond the boastful hype of Pudong's skyline, there is reason for optimism in Shanghai. Fishman tells the tale of Mr. and Mrs. Li, a couple who migrated to the city from the countryside six years earlier with little more than a blanket full of knickknacks. First selling their goods on the street, the Lis parlayed sales into new inventory and ultimately into a shop of their own filled with jade bangles, Buddhas and calligraphy brushes.
The couple's foothold in Shanghai -- and the successful migration of millions of Chinese from rural to urban China -- can be credited to several factors, Fishman says. Foreign tourists and Shanghai's growing middle class create a market for the Lis' bric-a-brac, most made in Chinese factories. An underground lending network that often originates in the migrants' home community provides a critical grubstake for newcomers. And finally, a government that used to brutally crack down on citizens who dared to leave their assigned provinces has decided to look the other way.
The result, Fishman says, is that China is now in the midst of the biggest peacetime migration in history. The upshot: Every month China builds a city the size of Houston to absorb its rural migrants. China already has more than 100 cities with populations exceeding 1-million. The United States, meanwhile, has nine.
Fishman says it is paradoxical that such improvements in personal freedom and earning power have happened under the Chinese Communist regime. Rather than orchestrate the change, or have it mandated from abroad, China's government has largely stayed out of the way of its people, Fishman says.
"Understand how China has advanced despite its impediments," he writes, "and one can sense how much more it will shake the world as its remaining, and considerable, barriers fall."
While Fishman doesn't spend much time on history, he traces China's spectacular economic reversal to a clandestine effort by starving farmers in the late 1970s. Forced into collectives by the government and assessed a heavy tax, the farmers agreed to quietly divvy up the land and assign plots to each family. Once the collective's obligations were met, each family could sell or barter any surplus coaxed from the land. Yields climbed, the farmers prospered and soon the government was wisely encouraging other rural areas to adopt what leader Deng Xiaoping called "a responsible contract system with profits linked to production."
Fishman chronicles how that simple -- and thoroughly capitalistic -- concept has spread like wildfire through China, changing that nation and the world. He visits Pekin, Ill., whose farmers are selling more soybeans to China while its factory workers are losing their jobs to that country. Meanwhile, a local manufacturer of parts for heavy-construction and mining machinery is trying to keep up with booming global demand by outsourcing low-margin parts to China while keeping production of specialty items at home.
In Mexico, Fishman finds maquiladoras -- foreign-owned assembly plants -- along the border shuttered as the work moves to lower-cost China. In Germany, he discovers Chinese-made Christmas ornaments that are beginning to rival traditional European decorations in quality, at just a fraction of the price. While German toy and craft makers may be getting slammed by China, Fishman notes that two of Germany's biggest corporations, Siemens and Volkswagen, have done quite well there. VW, the first foreign carmaker to manufacture in China, for years held more than 50 percent of the market.
But if anything is clear in Fishman's message, it is that no outsider will long dominate anything in China. VW's market share, while still robust, is declining as more Chinese manufacturers enter the market with technologies "borrowed" from former foreign partners.
There's no question the Chinese government has stacked the deck in its favor. It has decreed that in joint-venture arrangements, all intellectual property brought to the arrangement by one of the partners is owned equally by the other partners. One upshot: At Shanghai's big auto show in 2003, GM discovered that a Chinese company had produced a van identical to its new model, at two-thirds the price.
Fishman's book is full of such maddening examples of the messy side of China's rise. We are hooked, he ultimately concludes, in a cycle of codependency with China. We buy more and more low-cost goods from China, sending it dollars which it uses to buy U.S. bonds, pushing up America's debt.
"Without the United States to buy Chinese goods, China cannot sustain its growth," Fishman writes. "Without China to lend money to the United States, Americans cannot spend."
Fishman is not necessarily a doomsayer, but he seems at a loss for solutions. Improve U.S. education, he suggests at one point. Learn Chinese, he says at another. Focus on "relentless innovation," one expert advises.
But even falling back on America's penchant for innovation rings hollow when considering another of the jaw-dropping statistics jammed into Fishman's book.
This year, he says, China will produce 325,000 engineers.
That's five times as many as in the United States.
Kris Hundley is a Times business writer.
© Copyright 2003 St. Petersburg Times. All rights reserved.
I'd be interested in reading what FReepers who know something about China think about the ideas in this article. Are we looking at the rise of a world power with expansionist ambitions (beyond just Taiwan)?
ping
Neither the Democrats nor the Republicans are willing to face the facts of this matter. The American people are being sold out by "leaders" who should be acting in our interest, instead of Wall Street's.
Thanks, risk!
Chinese officials often say that listing Chinese companies on overseas stock markets is meant to improve corporate governance and transparency among its big companies. Yet Chinese firms are some of the most opaque and unaccountable listed firms anywhere. Typically, an unlisted, wholly state-owned parent company retains a majority shareholding--typically about 70%--in the listed subsidiary.
But who's buying all that Made in China stuff?
Deng also had a keen interest in NEP. Grilling Armand Hammer about everything Hammer could remember about his experience with the original New Economic Plan (NEP) devised by Lenin Deng used that and more to devise his NEP.
Some may ask, What's NEP got to do with China?
Mr. Hundley answers the question, But if anything is clear in Fishman's message, it is that no outsider will long dominate anything in China. VW's market share, while still robust, is declining as more Chinese manufacturers enter the market with technologies "borrowed" from former foreign partners.
Lenin called the "lenders" useful idiots. Given all that is known about the Chi-Coms many of us have that and another name for "American" capitalists rushing to kiss Chi-Com butts for bucks. The other name starts with a "t".
Americans. Someone else is in charge of maintaining national security, right? Cheap toasters are personal, not public issues for most people. The "experts" are in charge, and they don't see any problems. So why not?
DVD players? Hey, if it were possible these days I'd rather pay $500 for something that will last 15 years than $149.99 for plastic Chinese junk.
Youre absolutely correct...this is a giant NEP operation. There will come a day when Red China, along with their ally Soviet Russia, will re-adopt the posture of War Communism and nationalize all Western assets. I wonder how our Western free-traders will rationalize that away? Answer: they wont. Their folly will be laid bare for all to see.
It may be too late by then.
In other words we are dealing with Chinese theives. They let the foreign company open up operations for a little while, under the illusion that the company will amass a significant share of the largest market in the world. Then, Chinese companies, subsidized by the Chinese government, steal the technology, manufacture an identical product more cheaply (perhaps using free Laogai camp labor) and benignly drive the foreigner from the land. All this, under the guise of level-field capitalism.
I'm with you--but some parts of this article are scaremongering:
"This year, he says, China will produce 325,000 engineers. That's five times as many as in the United States."
China has one billion people. That's three times as many as in the United States. They NEED more, too, because they have diddly for infrastructure. China exports far many of those engineers, too, because engineers don't stay home after they've been well-educated enough to realize they can leave and make more money.
I am no advocate of American social science colleges, but notwithstanding the sheer numbers of Chinese engineers, I think that American engineers are far superior to anything Chinese schools produce...assuming the Americans got there and graduated on the basis of merit, of course.
Nonetheless, when you see things like this...
"It has decreed that in joint-venture arrangements, all intellectual property brought to the arrangement by one of the partners is owned equally by the other partners. One upshot: At Shanghai's big auto show in 2003, GM discovered that a Chinese company had produced a van identical to its new model, at two-thirds the price."
you have to think that the companies that move into China are simply shooting themselves in the foot. GM got exactly what it deserved. Any joint venture that gives China top-end tech it wants to preserve as its own intellectual property is killing itself.
I don't think this problem is self-correcting in a positive sense. Nature may "self correct" us out of existence when China finally has the power to take us on, and we can't even make one transistor ourselves.
Globalism is another word for third way communism. Think police state, for the 'third' part of the equation. Can you say worldwide revolution ?
I think it may be "for all to pay." In many ways including taxpayer backed OPIC, Ex-Im Bank and a host of government entities that back offshore ventures. Just think, the "capitalists" who bitterly denounce government interference will look to government to bail them out of their losses. Nothing new there, of course.
The other ways that we could pay will make that seem small. I just hope the "capitalists" don't sell all their rope to the commies. U.S. citizens are likely to want some of it.
'zactly. This is our doing as individuals.
I have doubts that China will be a super power
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