China Economy

China’s economy is booming, growing 9.9% in 2005 according to Li Deshui, the Commissioner of the Chinese National Bureau of Statistic becoming the 5th largest in the world. The economy will continue to grow, fueled by investments in infrastructure, urban and rural building, technological innovation, rising domestic demand and ravenous consumption of Chinese goods. Bloomberg News has predicted that China will overtake the United Kingdom this year as the 4th-largest world economy. The United State’s $12 trillion economy remains No. 1, while Japan's is second at $4.7 trillion.

China was the second-biggest contributor to global growth in 2004, after the U.S., according to the International Monetary Fund. Chinese exports increased 28 percent to $762 billion last year, a record $102 billion trade surplus. With overseas sales nearly 40 percent of GDP. China’s five-year plan for economic development includes increased efforts to stimulate consumer spending in their economy..

China has become the world's largest exporter of information and communications technology products. But while China embraces technology for creating products for export, it hangs on to older, labor-intensive tried-and-true aspects like its garment industry, a major factor in the country's $100 billion-plus trade surplus and nearly $200 billion trade surplus with the U.S.

China's ability to learn can’t be dismissed. Most of it’s tech products contain imported content, built on foreign technology, that was transferred, licensed, or "borrowed." It has create a niche as a tech product assembler but has no intention of remaining so. It's gearing up to become a global technology producer similar to Japanese companies Sony and Samsung.

Part of China’s transformation results from an upgrade of its educational system. China trains 200,000+ engineering students every year, and provides incentives for foreign-based science and engineering graduate students, many of whom are trained in the U.S., to come back home use their knowledge to compete and boost the country’s growth and economy

To boost their indigenous capability, China offers incentives to companies willing to transfer technology. The bigger the transfer, the better the incentive.

A typical ploy is to offer reductions in value-added tax (VAT) for electronics component manufactures willing to manufacture in China. Although these incentive programs were nixed by the World Trade Organization, other programs offered by local authorities under the radar are thriving.

Offshore R&D investments in China by affiliated U.S. multinational companies is more accelerating. The desire for technological advance is the driving force behind Chinese mergers and foreign acquisitions abroad. The IBM personal computer division sale to China's Lenovo is an example of how a low-margin tech business can yield invaluable technological know-how that Lenovo will obtain from IBM, once a U.S. personal computer icon.

We’ve seen this before. We beat the Japanese in a world war and now are active trading partners with a strong and developing Japanese economy. The Japanese graduated from making cheap product exports that U.S. consumers and companies laughed at. No longer. Sony, Mitsubishi, Samsung, Honda and Toyota have become technological giants, with their product lines preferred, not shunned. Korean products suffered the same disrespect and now are making great inroads into the U.S. consumer economy.

The U.S. needs to invest in education beyond encouraging high schools to graduate students who can actually read. Those who cannot read critically will fall for just about any argument offered, that stimulates the emotions or is heard often enough as part of a “talking points“ strategy. Science, engineering, business, global reach and international business studies have to be beefed up, because the country that leads in technology, who understands the meaning of global business outreach, will be the one to win the economic war while Doing Business In China.

This country was built to a level of greatness by inviting legitimate aliens to come and apply for citizenship, providing avenues and open doors to develop the technological lead that we now enjoy. Names like Werner Von Braun, Nikola Tesla, Guglielmo Marconi and Albert Einstein to name but a few, have provided the structural foundations for several industries. But if we allow our young minds to flounder or to be lured to other countries where bureaucratic obstacles are lesser, that this reverse knowledge flow could cause us to lose our edge in short order. We have to protect technology from being copied and stolen by other countries, and provide stronger incentives for stopping bootlegged products from illegally entering our country, than what exists now to import them.

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