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Mar 26, 2011

The Coming Economic War with China?

   Being as second-largest economic superpower, China influence goes far beyond its borders. She is being able to serve the world not only with cheap products but also with hi-tech ones. World Bank, IMF and Goldman Sachs have been observed the rise of Middle Kingdom as an economic powerhouse. All come to the same conclusion that, if all things go right, China will have overtaken US as the world-biggest economy at some point by 2050, raising the fear that China rise would be at the expense of the World. Thanks to cheap labor, massive inflow of foreign investment, advances in technology and the great stride made in infrastructure, China is at a competitive advantage comparing to its developing counterparts. Taiwan, Malaysia, South Korea, Japan and many other developing countries see great difficulty in competing with Chinese products in global marketplace, especially in Western countries and North America. At the same time, US is indebted to China amounted well over 800 billion dollars, the largest share of US debts. With reserved foreign currencies of 2.85 trillion dollars (Bloomberg News), China is over able to save Eurozone living desperately in need of somewhere around 600-700billion dollars rescue package. US indebtedness to China, the need of help to Eurozone from China, and the declining competitive edge of both developing countries and developed ones and the increasing military capacity has made many put a question mark before the word “China Rise”. China economic rise has two faces. Since the reform of 1978 to today, about 400 million people have been lifted out of poverty. China is running trade deficit with East Asian countries (export of raw materials), Wen premier said in an in an interview with CNN, and also with the West in term of service trade. China is currently the third-largest investor in Africa advanced by US and EU. Although a reliable statistics on Chinese aid to regions around the world has been in question, some analysts assume that it would be surprisingly large. I agree that China economic foundation, based export-oriented dependency, is limited but it is not that fragile. Recent turbulences in global financial market showed that China is not a fragile superpower. Economy of China grew at 10.3 percent in 2010, given the fact that the world is in crisis that caught every country by big surprise. The world is fortunate that the economies of two Asia, China and India, giant haven’t mired in recession as most countries did or we might have witness the return the great depression of 1929 heavily blamed on the speculation of financial crisis. China is the fast-growing economy in the world with biggest population, the credit of which will be ordained to India as China will grow old in the future. I am sure price that other countries paid in competing with Chinese’s products will be offset by the China’s quest of exporting materials and access to world biggest market. Also, Cheap Chinese products have been beneficial to US consumers. The buying of US debts has also kept interest rates at a low level. It is not sure if how much is China is willing to “Bailout European”.  The West is likely get most benefits from China rise in the form of doing business in most lucrative market and a stronger purchasing power of a richer China as President Obama used to joke “We want to sell China Everything.” It is in China best interest to rescue her largest trading partner from falling into debt trap. Finally, the world must allow China to export goods and service or Chinese leader will decide to export  it people.