Newspaper article The Christian Science Monitor

Time to Adjust Approach to China

Newspaper article The Christian Science Monitor

Time to Adjust Approach to China

Article excerpt

There's a Chinese dragon thrashing around in Asia, and the rest of the world had better pay attention. A country of 1.3 billion people, enough to make it a political power, is about to become an even greater economic power as well. For several years, China has been averaging 9 percent economic growth. This started from a very low base, but it doesn't take long for 9 percent compounded to produce spectacular results:

* China has become the world's second-largest consumer of oil. Its oil imports increased about 40 percent in 2003, and it is actively competing with the US for foreign oil supplies in the Middle East, Sudan, Canada, and Venezuela. If it has not already, this is likely to become a factor in keeping oil prices high.

* Chinese foreign trade has grown so much, so fast, that it has created a world shipping shortage. China is investing $4 billion in shipbuilding facilities and aims to be the world's largest shipbuilder by 2015.

* China may well already be the world's largest clothing manufacturer. Factories along a narrow strip of land curving around China's coastline produce prodigious amounts: neckties (300 million a year), socks (9 billion - repeat, billion - pairs), underwear (969 million pieces), and jeans (225 million), among others.

* China is becoming a foreign investor, including investments in high-tech industries - an auto assembly plant in Iran, a cellular network in the United Arab Emirates, and cement plants in Saudi Arabia.

This growth is altering China's place in the world. It is something to which both China and the rest of the world need to adjust.

For the short term, something needs to be done about international currency exchange rates. A considerable amount of the growth comes from the Chinese policy of tying the yuan to the US dollar. This has the effect of undervaluing the yuan, thereby making Chinese goods cheaper for foreigners and US goods more expensive. Result: In 2004 (January through November) the US spent $1.3 trillion importing Chinese goods while earning only $745 billion exporting US goods to China.

For the long term, China needs the political institutions generally associated with free-market economies. …

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