In past years, much was made about the economic potential of China. It’s a country that has for years been seen as a possible future economic power, while having the world’s largest population.
That future seems to be arriving. China has emerged as a player in the world financial scene, and it’s trending upward, so to speak. This topic was raised recently in a very good article at Invest It Wisely. I left a detailed comment regarding that article, which got me interested in sharing those thoughts here as well.
My personal interest and experience in China dates back about 20 years. At that time, I visited China as part of a student exchange program, which sent a group of American students there for about a month.
It was quite an experience to go there. At the time, there were very few high rises in Beijing, at least from what I was able to see. The airport was downright creepy, and was worse than any airport I have seen since then. Keep in mind that I have traveled a fair amount. There was one – just one – U.S. fast food operation in China at the time, as far as we were told: a KFC in Beijing. It might not have been the case, as our “teacher-leaders”, as they were called, wanted us focus on appreciating the native culture and the tremendous educational opportunity in front of us. Clearly, 20 years ago, we were out of our Western comfort zone.
It was fascinating in many ways: walking on the Great Wall, dining at the Great Hall of the People, seeing Tiananmen Square, visiting the Terra Cotta Warriors in Xian, and much more. Truly, it was an amazing life experience, especially for a kid coming from suburban Chicago.
That said, it was ominous as well, as it was clearly a controlled culture compared to what I was used to in the US. During our visit, we were warned not to take pictures of certain things, and this happened multiple times. I am certain that we were being closely watched while there, in case we went exploring in the evening. I left there thankful to have visited, and even more thankful to come back home to the good ole U.S.A.
As you might imagine, with that personal experience, I find it absolutely fascinating how China has changed since then. It’s like 20 years of calendar time has brought 60 years of advancements in some things, particularly in economic strength and the visible signs of it. An example of this is a person I know who has traveled there on business there within the last few years. He emphatically described the airport he visited there to be remarkable, with the roadways out the the airport being sparking clean and efficient. Clearly, this is different than that creepy old airport I had previously visited!
China is a growing economic beast, no question about it. Being an ancient culture, having a large population, and moving forward the way it is, it’s a formidable economic force in the making. Many of us already think about importing products when we think of China.
As a world citizen, I’m fascinated by what’s going on. Furthermore, the world is truly shrinking, so global events truly impact each of us, one way or another.
That being said, as a loyal, proud American, my primary interest is in my country keeping its place at the head of the table, so to speak.
It’s a bit of a flag waving viewpoint, to be sure. But frankly, I’m more concerned with what these things mean for our future and the future of our children. A high quality standard of living in my own country, reflected by an upper hand for the US (and our Canadian friends to the north) is the eventual positive outcome I’m looking for.
What are your thoughts on the growing economic strength of China? Do you think about what this means for us here at home, wherever that is for you?
I am not sure what I think will happen with China long-term. When I was a grad student in 1989, Japan was going to be the next superpower, and we saw what happened there. However, things seem different with China.
I have had the opportunity to work with many people from China (Beijeng). The company I worked for is openly committing to eliminating jobs here and hiring people with lower wages, such as in China and India. The individuals I worked with in China caught on quickly, and had an incredible work ethic. Considering jobs are leaving the US and going overseas, I do worry about our economy for sure. Either the US has to find new ways to create jobs, or we may be in trouble…
Kris – I agree on some immigrants being very smart and hard working. I saw folks in my grad school class that were from India, and they were phenomenally bright. Specifically, I recall a few folks who had done their undergrad at IIT – Indian Institute of Technology. This is a place so tough to get into that I have heard of people using MIT here in the US as a backup school in case they don’t get into IIT. May not be true, I don’t know for sure, but I do know that the students that came here were smart, very quick thinking AND acting, and generally hard working – without a sense of entitlement. Though they represented a small percentage of my grad school class – like 2 or 3% – they were as impressive as any.
We need to be able to compete in this type of environment, to maintain our place in the world economy. The world is shrinking, so to speak, and we need to adapt.
You raise some really interesting questions and these are issues that we should all be aware of. One of the China issues that stands out for me is the fact that they have massive capital reserves. The U.S. is carrying huge budget and trade deficits, and at $13.5 trillion and rising, the debt is unsustainable. There’s a golden rule that says “he who owns the gold makes the rules.”
Not only does China have a lot of money, they hold a great deal of that U.S. debt. Thank goodness it would not be their best interest to unload those treasuries quickly. Still, they have been lightening up on their exposure lately, and if U.S. savers don’t or can’t afford to step in to buy, it begs the question: Who will buy U.S. debt?
2 Cents – you bring up some great points.If you have the gold, you make the rules. Very true, money can wield power and control. I have to say, I didn’t realize the Chinese were that flush with cash.
I have seen the US debt described as one big “ponzi scheme”, so to speak. I certainly hope for future generations – actually, even my own generation – that clear steps are taken to rectify this in a way that inflicts as little pain as possible.
I think that it’s really incredible that you were able to spend so much time in China back then; it must have been a really great experience.
Here is my take on things going into the future:
1) Westerners carry too much debt on both an individual and governmental level.
2) Too much reliance on government regulation and political action rather than market regulation and entrepreneurial action.
3) Emphasis on inequality of treatment and equality of outcomes, rather than equality of treatment and equality of opportunity
4) Decline and internal rot from general lack of competitive pressures within the government sphere of influence.
5) Continuing cultural bias in the “natural superiority” of the American way. We cannot attribute past successes (based on relative situations) to today’s world and expect things to remain the same going forward.
If Americans in the aggregate really do want to maintain a high standard of living, then they had best stop treating finances as if they had a black credit card with an infinite credit limit… despite what some economists think, messing around with numbers and bank balances does not generate real wealth and prosperity.
The best things that Americans could do is to realize that their government will not save them from the changes coming ahead. Even governments are subject to the laws of economics, and even the US government, with all of its military might, is not immune from this. What made the US great in the past was values of liberty, justice, and the opportunity to pursue happiness. The emphasis was not on equal outcomes; it was on equal treatment by the law.
Today, that equation has reversed. No longer is the US a beacon of prosperity as it was for millions of immigrants in the first half of the last century, and nowadays, people are treated *un*equally by the law, in the hopes of obtaining equal outcomes in some spheres. In other spheres, people are free to make private profit, but everyone can equally share in the losses.
To me, the government is like an old corporation that was founded on good ideals, but hasn’t faced some competition in some time and is declining from internal rot. I hope that as China and others become more successful and competitive, that they can bring increased weight down on the US government to adapt or get left behind. It would be nice if it didn’t have to come down to that, but it seems that without that pressure to survive, politicians lose complete touch with reality.
Thank you for linking to my article, and I’m glad that it inspired you to write about your own experiences and thoughts about China and where we are going.
Kevin –
Thanks for the detailed response. You had a thorough article – as usual – so it’s no surprise that you had a thorough comment here.
I don’t want my country to end up moving down the path of being a large-scale version of current-day Detroit. The Motor City, as we know, dominated the auto industry, but cost and competitive pressures – among other things – really allowed it to lose it’s edge, to put it nicely. The American dream of a large middle class that can make with plentiful jobs was alive and well there, but it’s far from that situation now. It’s a great city that I’m rooting for, but the reality today is that it’s living and dying simultaneously by what was built there in the past. Further, it’s had financial issues.
Now, I realize that this is an exaggeration on my part. The U.S. is a more diversified entity than Detroit, obviously, and we’re dealing with a vastly different scale issue. It’s not the best analogy, but it’s one way to illustrate the concerns for down the line. We need to improve our finances and regain our competitive edge.
Don’t get me wrong – I still think this is the destination country for folks around the world, and is a place where a large percentage of people have a legitmate shot at a quality life and at least an option of making it big. But the playing field is no longer squarely and overwhelmingly in our favor. The current situation in the world is different, and the field is leveling out.
In terms of cultural bias, that’s a tough one because as Americans – particularly those of my generation (late 30’s) – we were raised to be intensely proud of our American way of doing things. We grew up with the comfort and perception that we were lucky to be raised here, and that we were a world superpower. It’s hard to shake that, and I find it difficult to give that up.
My hope is that we (those of us here in the U.S.) can harness the true entrepeneurial American business spirit that helped bring this country to it’s position in the world, and strengthen our position.
It’s not trending in that direction right now, but I hope it can happen through a lot of hard work and fresh thinking at all levels, so the playing field can be set in such a way that allows future generations here to live the prosperous life that we have grown accustomed to.
Again, I know I have a flag-waving perspective, but my interests are more aligned with my home country (and our close friends) than the mass of world nations at large 🙂
Interesting perspective. I don’t think I have thought of China’s economic position as a patriotic matter, but I guess the long-term implications of the U.S. lagging behind could be huge. Anyway, I would be curious to know what about their economic model could work in our economy. As we continue moving towards a global economy anyway, this race to the top of the pack was inevitable.
Roshawn – The long-term impact on the U.S. is exactly what I’m thinking about. Our position of massive debt is a big issue as well. There are reasons to be concerned, but I’m hopeful we can obtain a sense of urgency as a nation.
I intend to capitalize on the growth of the Chinese economy. This might just be the beginning of their prosperity. You will notice that I am invested heavily in Canadian oil producers which gives me a safe leverage to not only China but all of the emerging world economies in the safety of Canadian companies!
To not worry about the future of our kids would be short-sighted. I do worry and that is why I’ve started to education them about investments, and started saving money for them now. I have a bit invested in China even! They could grow for years before stabilizing… and they will stabilize eventually.
I agree with everything @Everyday tips and @BeatingTheIndex.
I like the Chinese people (at least the ones that I’ve known and worked with over here) and hope for them the best!
Of course, I hope for the best for us too. I think we do need smarter politicians in office. They are focusing on pie in the sky goals while we slip backwards.
I appreciated the post and especially agree with Kevin’s comments. I’m not much of a follower of international trade events but wouldn’t it be somewhat true to say that the reason China is becoming a superpower is because much of the American manufacturing is done there?
I guess to me it’s kind of a 1 + 1 scenario. We send our manufacturing overseas and while our unemployment rates reach 15m the other country gets increases in power and prosperity. Am I simplifying too much?
I think about this topic a lot. With growth slowing in the USA and speeding up in Brazil, China, & India, our days as the forerunner of the world economies may be numbered.
I was at a manufacturing customer yesterday and he was complaining about how difficult it is to get good staff for his second and third shifts. He said one of the problems was that these people can make almost as much money sitting at home collecting unemployment vs working, so they opt to sit at home.
There are jobs out there and I can’t believe I hear this type of thing over and over again in a supposed bad economy. Entitlement is killing us. Someone once told me that all great civilizations came to an end when the government tried taking care of everyone. What incentive do many unemployed people have to go back to work? I personally know people sponging off the system and it makes me sick that they are able bodied with skills and don’t even try to get work. I’ve seen all walks of life and some have truly had it tough, but many choose a lifestyle of poverty and government assistance because it’s less work that way.
I’ve worked a lot with China and other developing countries. Those people work their tails off and know that’s what it takes to get ahead AND they are happy to have the opportunity to do so.
When Warren Buffett invests in China you have to start paying attention. They are an economic superpower in terms of GDP, but per capita GDP still has quite a way to go before becoming competitive with most of the developed economies. But they have cheap labor and people who are willing to work their tails off. Sounds a lot like the US at the beginning of the industrial revolution.
Biz of Life – yes, when the great Warren B invests, it certainly does merit attention. I have to say, they have taken advantage of their resources well of late, and have emerged as a true force economically. I’m not sure their overall model is sustainable long-term, but they’re a force to deal with now.