The March and March of China
That China has become the manufacturing hub of the world is no longer news. China is today an economic giant and its economy is on the growth path. Yet it is in many ways economically an emerging country. It is still not counted as a developed country. In fact it is a member of BRICS, where it shares company with India, Russia, S. Africa and Brazil, all countries whose economies are a fraction of China's economy.
Achievements:
China has emerged as the top nation in the world in international trade in both imports and exports, displacing America. China has the largest amount of foreign exchange reserves outside of USA to the tune of over $3,500 billion (India's reserves are a meager $ 300 bn at the best). China's car market is now the largest in the world and it produces twice the number of cars than USA. China also has the distinction of being the largest gold producer in the world and its annual consumption is also the highest around 850 - 900 tons. It produces nearly 90% of the world's rare earth materials. China has captured the number one position in the manufacture of wind and solar power equipment displacing Germany whose industries are struggling in this field. What is interesting is that nearly 85% of all Christmas trees in the world are made in China. The massive construction industry in China consumes the largest quantity of cement in the world. China is again a leading producer of toys. Cheap electrical items and machinery have made China a major player in the world. The Chinese produce coal and steel in huge quantities like three and eleven times that of USA respectively. China has built a widespread and very impressive infrastructure of road, rail and air which is very efficient and of a very high order. China is the largest producer of synthetic yarns and textile exports is a huge business. In fact China is a large producer of almost all range of products in the world.
The foreign trade balance is positive meaning that its export earnings are more than its outgo on imports. This has resulted in China having the largest reserves of foreign exchange reserves. China has a positive trade deficit with USA to the tune of $ 2.3 trillion meaning that USA is having a trade deficit with China. China is using these surplus funds to acquire and run businesses in USA. It recently acquired the largest pork producer in the world namely Smithfield Foods at a cost of $4.7 bn and now has also become an employer of large number of Americans. Sometime back a Chinese company purchased an American entertainment company owning the largest number of movie theaters in USA. The Chinese are heavily buying assets in USA like coal mines and the falling auto industry among others. Increasing number of Americans are now being employed by Chinese owners in their own country.
China is also in the process of building large cities like it is doing outside Minsk, capital of Belarus. It is expected it will do so in USA and other countries also in the future.
Road to economic development :
How has China achieved such high economic status in relatively a short period of time.
As we know China became a communist country in 1949 under the leadership of Mao. It viciously followed anti capitalist policies which further retarded its industrial and economic growth. It suffered in agriculture also. The infamous 'Great Leap Forward' initiative also was a failure. In 1966 Mao launched the Cultural Revolution and its Red Guards created a reign of terror in the sixties and seventies. All this took China backwards rather than forward in all areas of its economy.
However things changed in 1978 when Deng Xiaoping took over the leadership mantle following the passing away of Mao. He was a pragmatic leader not so keenly wedded to ideology. His famous statement that who cares whether the cat is white or black, till it catches the mice set the ball of industrial progress rolling in China. Reforms in almost all areas followed and China was ruled by the Communist Party sans communism and more of capitalism. It made such policies which made foreign direct investment very attractive for foreign companies. It was the first country to create special economic zones which were to act as areas where international companies could manufacture and operate without Chinese interference. This boosted investment and brought increase in revenue and foreign exchange into China.
Deng also allowed the Chinese farmer to sell surplus grain in the market and keep the profits. This was a revolutionary step as under Mao the farmers lived in communes and all surplus belonged to the State. Deng also gave partial ownership rights of land to the farmers. Agriculture production rose by 30 %.
Subsequently China also passed laws giving protection to private enterprises as during Mao's time and later on also, all industries were state controlled. They were thus inefficient. However after the reforms the Chinese industry also started registering high growth rates. In fact during the period from 1990 to 2004 China grew annually at a high and consistent rate of 10%. This resulted in its economy growing by leaps and bounds. In fact in later years it has posted growth rates as high as 13% in 2007.
China's gross domestic product stood at $3.38 trillion in 2007 while German GDP was $3.32 trillion. In 2010 China with a GDP of $ 5.87 trillion crossed Japan's GDP of $5.47 trillion. It is predicted that both China and US will have a GDP of $24 trillion by 2021 and then China will overtake USA.
In the fast growth of the Chinese economy a large and significant role has been played by American industries. The rising wage structure in US makes manufacture of a large variety of household and industrial products not only costly but also nonviable. This has resulted in a very large number of American industries moving their production to China and then importing the low cost items. Thus they retain their market share and the Chinese get jobs and revenues.
The Chinese wisely invested these revenues in creating world class infrastructure. They invested heavily in education especially in technical areas and promoted R&D in universities. The have successfully warded off repeated requests by USA and others for devaluation of their currency, which has given them an edge in exports. They have kept down worker agitations for increased wages, have ensured energy supplies at low costs, reformed their banking sector and laws all of which have boosted foreign investment and international trade. They have adopted latest technologies very fast. They also establish large size plants to take advantage of economies of scale.
Today China has rightly become the manufacturing destination of the world. It makes the cheapest of the items and also the sophisticated latest technology products at prices others find difficult to match. It also has emerged as an assembling destination by doing job work at low rates but making up in huge volumes. It gets around $8 - 10 per iPhone it assembles but turns them out in millions. The range of products it manufactures in almost all areas of industry is mind boggling, ranging from simple household items to sophisticated electrical and electronic items. It manufactures latest defence items and has an active space program. It is indeed very difficult to compete with the Chinese in industrial item manufacturing. You name it and the Chinese make it.
The harsh reality :
However while the world enjoys cheap products from China, the Chinese do not benefit the way one would expect the population of second largest economy to benefit. The worker wages are kept low. Although a communist country (in name) the workers can not unite and agitate to improve their earnings. Working hours are long and harsh. The massive industrialisation has resulted in large scale migration from rural areas to feed the job market. This has resulted in cramped houses being the norm. The state is very powerful and can order evacuation of population from areas designated for industrialisation or other activities at short notice and inadequate compensations. Absence of political rights have created a state of regimented citizens who cannot vent heir anger and frustration. There are no democratic style elections in China. Leaders are not elected but are selected. The membership of the Communist Party is very restricted and those who succeed have great clout. A good number of Chinese leadership and officials are highly corrupt, in spite of very harsh punishments including death sentences being given upon being caught. The Chinese media is totally controlled and no criticism of state policies are permitted. Almost all development is in coastal cities and hinterland continues to be poor. The per capita income of Chinese continues to be low although the number of rich people is also growing. Exploitation of the weak and poor continues.
The Benefits:
When the Chinese decide to do something they do it with exactitude and achieve world class. This is very evident in their achievement in sports. With clockwork efficiency they produce world champions repeatedly. The pinnacle of their achievement in sports was their holding of the 2008 Olympics and the record number of medals they won.
The rise and march of China in modern times is a feat of great achievement for the Chinese society. It shows how with visionary leadership. dedicated efforts, supportive facilitation, healthy motivation a large and a poor country also can be propelled into a highly successful economically strong nation. In fact China is now not only seen as a economic powerhouse but a rising military power ready to spread its tentacles around and across the world. In fact it is already challenging America in many ways. It is only a matter of time before America will have to hold friendly consultations with China for many global initiatives it is so fond of taking.
China has truly arrived on the global scene.
(Image from Wikipedia)
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