China — a potential bully?
Posted on 12. Jan, 2010 by scott in general musings
Over the weekend we learned a few rather amazing things about the most populous nation in the world:
China is the largest auto maker in the world now (bypassing America about 10 years sooner than expected), along with that they are also the largest steel maker. I don’t have the actual figures but I would also bet they are the world’s largest TV maker — I couldn’t find a single non-Chinese made TV at Costco or Best Buy.
There is more. In December China imported a record amount of crude oil, and iron ore shipments were the second highest ever.
China continues to hold the largest amount of foreign debt at roughly $2 trillion (of which about $700 billion is U.S. government debt–more on that later).
It seems clear that China will soon become (if not already) the major force in natural resource markets world-wide.
Then there was the announcement that China is now the largest exporter in the world, by-passing Germany (the leader for decades until now) with exports of $1.2 trillion.
But, what was most surprising was the raw size of increases achieved by this highly regulated economy. The Delta or rate of change was high enough to wake up a few tired old ‘free market’ economists.
Exports from China bounded forward by nearly 18% in December, 4 times the expected rate, and this ended a 13 month streak of year-on-year decreases.
Imports to China grew by an incredible 55.9% in December and were nearly double the expected Growth. This increase demonstrates that China is continuing to grow its ’spending’ middle-class and further stockpile raw-materials and industrial equipment at prices that are very low due to the continuing recession in the developed world (I really hate that differentiation).
China is now the third biggest economy behind the United States and Japan (which it will likely pass soon). Though this is impressive, with its 1.3 billion population, China continues to be one of the world’s poorest countries and this bears keeping in mind as we marvel at their growth.
Rather amazing all this, given where China was just 15-20 years ago (believe me I know . . . I spent a lot of time there at that time). However, as the wakeup continues, this phenomenal growth should drive some painful but real political and economic stakes into the leaders at the top of those aforementioned developed countries (U.S., Euro zone, Japan).
There is some more statistics to be wary of too. South Korean exports grew at a 47% clip in December and Taiwan posted 34% growth. Both of these countries are major trading partners with China and considered under their ’sphere of influence’. Then there is the fact that Taiwan is likely to become a ‘Hong Kong’ style part of China in the foreseeable future.
It is pretty clear where global leadership is right now.
Chinese political, economic and monetary influence is second to only our own at this time . . . and it is growing while the U.S.’s is in decline. This despite President Obama’s effort to represent a kinder and gentler United States of America.
All of this translates into some pretty predictable Macro implications.
No longer will the U.S. control its own economic zone in our hemisphere because China, with its thirst for raw materials and huge Capital surplus, is investing heavily in South America.
No longer will Europe be the primary beneficiary of Africa’s enormous resources because China again is investing $ billions top secure its ’supply’ of necessary raw materials.
So, what happens in another 5 or 10 years? Where are we going to buy what we need? Will China end up selling ‘us’ resources obtained from other countries at a stiff markup?
While the developed nations are losing GDP and going through the worst recession in history (not a depression yet), China and its nearby partners are actually growing in both GDP and global influence.
The bully part?
Heck that’s easy.
Chinese leaders are already taking President Obama to task due to their perceived ‘carrying’ risk of American debt — can you blame them with our deficit?
Trade restrictions that have been proposed (or already announced) against China are not viable economically and become potential arrows in the Chinese arsenal that could serve to limit developed nation imports (which ‘we’ need to grow out of this danggum recession).
China seems to be more in control of important world-wide issues than we are. This excludes military might — but they are catching up as they plan their own aircraft carriers and large aircraft manufacturing and assembly infrastructure.
Think about that.
They have a viable space program, they have a large nuclear arsenal and the missile capability to ‘deposit’ warheads anywhere on earth. They buy enormous quantities of natural resources from countries that really, really need to sell them. China does not formally allow foreign investment in state-run enterprises or even private ones. But, they are on the hunt to buy up massive amounts of other countries public and private assets while they have excess cash.
This isn’t fair and it isn’t right. No wonder Australia wouldn’t let them take over Rio Tinto — the worlds largest mining company. And thanks heavens for that!
China (or their secretive government) is very close to being in control of the World’s economy. That needs to be taken seriously.
The real problem is that they know exactly how important and powerful they are in the global environment right now. No dummies, these Communist leaders are starting to stretch their legs — on every continent but Greenland.
Bottom line: China has a whole lot more clout than most people recognize.
President Obama, Merkel, Sarkozy and Prime Minister Brown (among others) had better start developing a plan where they combine and ‘unite’ all of their economic and political clout so that the ‘free world’ stays in place to trump any Chinese moves.
Crap, and we thought the Middle-East was the center of our biggest problems — not anymore it seems to me. If you have any ideas then let me know and pass them on to the White House too!
thanks to flickr’s jervetson for the photo
Honors and Recognitions
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