Emergic: Rajesh Jain's Blog

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China and America

September 18th, 2005 · No Comments

WSJ has an editorial page article by Charlene Barshefsky and Edward Gresser entitled “Revolutionary China, Complacent America.”

China is opening to the world, merging its low costs and vast manpower reserves with the financial and technological strengths of its wealthier neighbors. In the process, it is rapidly creating an informal “Asian Union” — a deeply integrated Asian economy with a GDP equal to America’s, a population six times as large, the technological and financial strengths of an advanced economy and the cost advantages of a developing one. This powerful competitive challenge cannot be met by protectionist legislation, penalty tariffs or bans on Chinese investment. Instead, America needs a strategic response that rethinks our own consumption and debt-led growth, addresses our competitive weaknesses and reshapes our approach to Asian trade and global financial institutions.

America faces no such grim future: What we do face, however, is a substantial challenge. We have been the leading economy for a century. But other countries of similar size and potential can catch up — if they try, and we remain content with past glories. China’s economy has tripled in size since 1980 and continues to grow at 9% per year: it could equal ours by 2020. China is also climbing the tech ladder, investing in ports, coastal-road systems, telecom networks, research centers and universities. It draws $50 billion a year in foreign direct investment, and topped $60 billion in 2004. It is already getting results, first shifting from exports of light, labor-intensive manufactured goods to heavy industry and technology, and now to a new role as financier and outward investor. This is happening because China is getting some big things right; its neighbors are contributing to and benefiting from its success; and we are not keeping up.

Tags: Emerging Markets

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