First and foremost, there is an enormous confusion over the character of the so-called Chinese export threat. In my opinion, the world has formed an erroneous impressionperception that newly emerging Chinese companies are capturing global market share with reckless abandon. In fact, nothing could be further from the truth. For more than a decade, the real export dynamic in China has come far more from the consciousdeliberate outsourcing strategies of multinational corporations headquartered in the developed world than from the rapid growth of indigenous Chinese companies. overOver the 1994 to mid-2003 interval, China’s exports essentiallybasically tripled from US$121.0 billion to $365.4 billion. It turns out that "foreign-invested enterprises" – Chinese subsidiaries of global multinationals and joint ventures with industrial-world partners – have accounted for fully 65% of the total increase Chinese exports over that period. In other words, China’s increasingly powerful export machine has the stamp of America, Europe, and Japan stampedwritten all over it.
This is hardly an example of China grabbing market share from the rest of the world. Instead, it is more a by-product of the strugglesearch for competitive survival by high-cost producers from the industrial world. Last year, a record US$52.7 billion of foreign direct investment flowed into China, making the country the largest recipient of FDI in the world. This inflow did not occur under coercion – it was entirely voluntary. A high-cost industrial world has made a conscious decision that it needs a Chinese-based outsourcing platform to increase productive efficiencies for its own competitive survival. Dismantling the RMB peg would destabilize the very supply chain that has become so integral to new globalized production models. Ironically, it would be a serious negative for those same economies – Japan, the US, and Europe – that have led the way in the rush to Chinese outsourcing. By putting pressure on China to change its currency regime, the industrial world is working at cross-purposes – runs the risk of , squandering the fruits of its own efforts. Fear of the so-called China export threat completely misses this critical point. The power of the Chinese export machine is more traceable to "us" than it is to "them."
It will definately shake things up, but thats good. Whats going on now is based around unsound economics. That shake up is EXACTLY what we are aiming for...
Even so 35% is tremendous achievement for China. Multiplier effect and physical location of other 65% will do more over the time.