Monday, December 10, 2007

Review of "China, Inc." by Ted Fishman

This book presents fascinating insights into China and its fastest growing economy, at 9.5% annual growth, in world history. China has instituted politics allowing more capitalism into a formerly strict communist society. The result is a large and disciplined (and arguably exploited, although living standards are improving) workforce under government control with an economy that recognizes, reacts, and is dominating global trade. China offers a large supply of low cost labor and already makes more consumer electronic products than any other country. In modernizing its manufacturing sector, China laid off more employees in its inefficient plants than the U.S. employs in total in manufacturing. In terms of purchasing power, China has the fourth largest economy in 2004 at $7.3 trillion of gross domestic production (as estimated by the CIA).

China is adapting to world trade markets and is directly competing, and winning, against specialized outputs of other countries. China is now the leader of such past national specialties as American and European designs of furniture, Japanese televisions, Italian fine silk products, and German ornaments. Counterfeiting of other nations' goods is not only tolerated in China but some see as retribution for past forced intrusions into their country. It is worth noting, as China adapts to the rest of the world, that the country with the largest population of people speaking English is now China.

China is attracting foreign investment and is purchasing foreign debt. China is the country with the largest holding of U.S. Federal government debt. China is creating world class business managers. China reversed crippling economic collective farm policies that led to tens of millions of deaths by starvation. It now allows farmers to earn profits, which is successfully encouraging them to increased production. China has created and explained urban areas which has attracted a sizable manufacturing population.

This growth comes with costs. China has relatively low pollution standards compared to other countries and its air and water suffer. Clean tap water reaches only 15% of the Chinese population.

The increase of generally less expensive Chinese products impacts the U.S. American consumers are estimated to be saving $500 to $600 annually by buying Chinese goods. At the same time, American manufacturing is rapidly shrinking as it cannot compete with these lower prices. American pension funds have been gaining through investing in Chinese enterprises. Chinese purchases of American bonds are helping to keep American inflation rates down.

China is preparing for the economic future. China is moving into oil and gas with $5 billion of such investments. Its education system is producing more graduates and is gaining over a weakened American education system. China has purchased many mineral companies and is able to set world mineral prices while guaranteeing its own mineral needs will be met. If this growth continues, especially considering China is the country with the largest population, China is on the brink of becoming the 21st century's economic giant.


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