Sunday Discourse by Philip Fernando in Seattle
Asian giants China and India have shown colossal economic gains generally considered epochal and almost parallel to what USA went through during period following World War II. India just unveiled the cheapest car in the world and its capacity to attract investment and jobs are almost legendary. China’s growth rate has even surpassed the ravenous consumerism of the west in terms of goods and services produced. They are going through the most rapid industrialization in history. China has factories that can accommodate 200,000 workers. The most critical measure of success is that both countries are showing tremendous acumen in creativity in management and production methods.
According many published accounts, among the 193 nations in the world, China is easily the number one in steel, concrete and metals consumption. China manufactures half the cameras, one-third of all TVs, and by 2015 over sixty percent of all cars made in the world. World’s most reputed and posh car manufacturers have set up shops in Beijing: Porsches, Ferraris and Maseratis.
Several studies by research groups predict that China’s middle class of 100 million would increase to 700 million by 2020. Billionaire Rupert Murdoch foresaw this phenomenal growth years ago and spent a fortune spreading out is roots in China and has shown tremendous potential after a slow start. Microsoft has a solid foothold in the region. These are only two of the western giants trying to make it big over there. Hundreds are following suit in areas so varied that it is too numerous to mention here.
Economist Maynard Keynes’s equated the building of Pyramids by armies of surplus labor in ancient Egypt, to what came to be known as the stimulus driven economic growth. Induced demand for goods and service did the trick when consumption was low. The recent congressional bonanza to the U S consumers to the tune of a $ 152 billion stimulus packet was nothing short of a gigantic demand booster, instead of building pyramids, consumers are rushing to Walmart. China is bent on taking similar steps to keep alive its growth rate.
The fiscal boost is occurring in China at a terrific pace. World Finance Ministers gathered few weeks ago in Tokyo to talk of similar stimulus packets. Increasing spending will also happen in Britain according to Alistair the chancellor.
Most observers felt a tinge of gloom when China showed a drop in its export revenues. Contrary to what was doomed a down turn, China has increased its reliance on domestic spending to an unprecedented level. China’s economy now relies greatly on the internal demand caused by massive doses of investment on power plants, roads, railways as well as consumption of car, clothes, shoes etc. So much so that most economist believe that the drop in external demand for goods produced in China due to the recessionary forces in the west have not been felt to the extend anticipated.
China’s appetite for raw materials is almost astronomical. According to the World Bank the net exports of China contributed less than one percent of the GDP in 2007. In contrast the domestic demand had grown by ten percent.
Growth rate driven by investment and domestic demand is what the world wanted to see happen in China. If the Chinese economy were to depend on exports to an inordinately high degree, any recessionary downturn in the west would have had deep financial implications. China is world’s largest importer of iron ore, refrigerators, grains, cell phones, TVs, timber, foundries and fertilizers to name a few. It has assembled the largest number of bull-dozers, cranes and building equipment in the entire world.
China is emulating the classic economic growth model and relies on the proven method of delivering goods and services according to economies of scale. With foreign exchange reserves of the highest level possible, the chances of development getting derailed were considered miniscule. It is ironical that what China is practicing now is also hotly debated here in the US as primary elections have centered on the topic of how best to stimulate the economy by consumer spending. Are the roles being reversed? Adman Smith the author of “Wealth of Nations” must be turning in his grave to see the type of free-enterprise system taking root in a place far away from his English country home.
The flip side of industrial growth has also surfaced due to the vast amounts of hazardous waste generated. Air and water pollution are a major problem. China is now the leading emitter of CO2 in the world ahead of the US. China is spending millions on environmental recovery and protection programs. Here too the scope is immeasurable. Cleaner methods of production are being pursued somewhat belatedly.
Philip Fernando is the former Deputy Editor of the Sunday Observer. He has a degree in economics from the University of Peradeniya.
- Asian Tribune -
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