Nearly half of respondents to this week’s RBJ Daily Report Snap Poll-47 percent-think China’s economic emergence poses a threat to businesses in the United States.
A new International Monetary Fund forecast predicts that China’s economy will surpass America’s in real terms within five years.
One-fifth of respondents see the Asian nation’s emergence as more of an opportunity for U.S. firms, while nearly a third say the trend is neutral.
The IMF’s analysis of purchasing power parity shows the Chinese economy growing from $11.2 trillion this year to $19 trillion in 2016. By contrast, the U.S. economy is projected to grow from $15.2 trillion today to $18.8 trillion five years from now.
As a percentage of world economic output, the IMF predicts, China’s economy will grow from 14.3 percent to 18 percent in 2016 while the U.S. share will decline from 19.4 percent to 17.8 percent. However, the United States will retain a big lead in GDP per capita: $57,320 to $13,729.
Nearly half of readers participating in the poll say China’s economic emergence has had no effect on their business. Some 26 percent say it has negatively affected them; 8 percent say it has helped their business.
When the same questions were posed to readers in July 2009, fewer respondents (41 percent) saw China as a threat to U.S. businesses. In March 2007, 43 percent said China was a threat to U.S. businesses.
In the 2009 poll, slightly more readers-10 percent-said China’s effect on their business was positive. In 2007, 12 percent noted a positive impact on their businesses.
More than 250 readers participated in this week’s poll, which was conducted May 31.
Do you think China’s economic emergence is more a threat or an opportunity for U.S. businesses?
More a threat: 47%
More an opportunity: 21%
Equally an opportunity and a threat: 31%
How has China’s economic emergence affected your business?
Both positively and negatively: 19%
No impact: 48%
Here are some comments from readers:
Economic growth in any country is always an opportunity, especially if (we) individually and collectively act on it as an opportunity. As a company, we need to see what is the specific opportunity and how do we supply it profitably.
—Mike Bleeg, Strategic Results
The Chinese economy is a blend of a free-market system and a state-directed system (ying and yang). China has been very effective at finding a middle ground between the two concepts while the United States engages in endless debate regarding the advantage of a free-market system. We have forgotten that at key points in our economic history we, too, have very successfully blended free-market and state-directed concepts. Examples of this is the development of the transcontinental railroad, building the Erie Canal (key to Rochester’s economic development), development of our interstate highway system (increasing transportation productivity by 35 percent), development of commercial air transport, development of our public water supply and our sewage disposal system, funding of research to combat disease, etc. The list is endless, and the importance of the public/private initiatives that could benefit our society and economy is of increasing importance. Our greatest need is to recognize the value of public/private initiatives and, working together, move forward. We will fail only if we fail to work together to achieve agreed-to goals.
China has been able to manufacture competing products at or below our manufacturing costs. We need China to comply with environmental, labor and currency standards of the world so we can compete on the same playing field.
—Mike Hogan, Information Packaging
As China continues to emerge economically, I sense they will become more interested in the economic growth of China and will lose their appetite for U.S. debt instruments. With no one to buy our debt, our risk of default will continue to grow, and with no meaningful slowdown in spending, more serious economic issues will become a reality.
—Jim Goff, Landsman Development Corp.
Our business has been hurt by our customers chasing the cheap fix and utilizing Chinese manufacturing. More recently, however, we have seen business come back from China as these companies realize that freight costs, long lead time and poor quality outweigh cheap prices. China’s emerging market presents opportunities for U.S. businesses to profit. Unfortunately, that profit comes more from the cost side (companies leveraging a cheap labor market and cheaper business environment due to lack of regulations) than from the sales side (proudly selling U.S.-made goods to a more affluent Chinese population). We can no longer outsource our businesses—especially manufacturing work—overseas, be it China or India. Rather, we must reshore our work here in the United States and make our products more attractive to Chinese consumers—especially focusing on quality and craftsmanship as we may never be able to compete with them on price alone.
—Peter J Short, J.J. Short Associates Inc.
The question should be “Why has the United States engaged in trade with Communist China in the first place?”
Global economic growth and development in a free-trade environment have always presented opportunities for those who are willing to explore new ways to engage the new companies and consumers who will inevitably look for ways to prosper from their new economic status. Chinese economic growth is a huge opportunity for those who are willing to provide those goods and services to an expanding Chinese consumer base.
Communist countries may surpass us in manufacturing but will not surpass us in creativity, research or entrepreneurship. As long as there is a system of “thought control” that discourages new ideas and risk-taking, the U.S. will continue to dominate in these areas as well as in the new information economy.
—J.P. Gleason, Gleason Fund Raising Consultants
How can people be so naive? If we don’t make anything domestically, how can we protect ourselves, take care of ourselves or feed ourselves? We need to be as we used to be: self-sufficient.
Central planning only works for so long. How long will it be until the effects of this much waste brings their system crumbling to the ground?
—Devon Michaels, Chili
The U.S. should enforce bans on Chinese products that use bandit code, protected foreign developed devices that have been reverse engineered and all products that use stolen “stuff.” Microsoft would surely love it. It just might bring a good China into the current world sooner. It would quickly solve our trade deficit and help our economy if Chinese companies paid their fair costs.
They will acquire the existing goods and services that we previously had access to. Plus, we are almost bankrupt, and they are on a positive growth cycle. Also, don’t we owe them more than they owe us? It doesn’t add up in our favor.
—Kurt Dreas, Photo Associates USA
The main reason that China’s economic growth is a threat is because of the poor response of our esteemed politicians to China as a global business. We continue to beat them up for their currency valuation, intellectual property violations and human rights abuses but do little to really strengthen our economy to the point that we could go head to head with the Chinese on a global basis. And yet we continue to drag our feet on financial reforms here, assuming that the Chinese and others will continue to buy our debt. Someday, I fear, that debt will be called, and maybe sooner than we are prepared to pay it. What will we do then? Continue to call them unfair? Just think, if we were holding Chinese debt and they were as poor at managing their financial house as we are, don’t you think we’d be cashing out? I think we would.
Several decades ago, there was a TV episode called "To Serve Man." It dealt with a race of superior beings who came to Earth with the intention of helping the human race. Wars were stopped, weapons were destroyed, public health was improved, food shortages were eliminated, economies flourished; all in all, everyone was fat and happy. Before long, thousands of people each month were able to take trips to the distant planet. Then one person, someone connected with a prestigious university, completed work on a translation of a book that the aliens had dropped. Turns out, "To Serve Man" was a cookbook. So endeth an important lesson.
—Steve Hooper, Health Economics Group Inc.
Face it, China isn’t going away! Our best chance to compete with China is twofold. One, keep investing in technology and mechanization here that keeps our per unit labor cost low so our products are competitive. Two, export our union organizers over to China to get the Chinese work force unionized and better paid. Once they are making a decent wage, the Chinese will actually be able to purchase some of the products they produce for export. Maybe then China will export less because their output will be needed to satisfy local demand. What they do export will be at a much higher cost. That in turn will create opportunities for the United States to do more manufacturing on our own soil. And then maybe we can begin to see our wages start to rise again.
—George Thomas, Ogden
The emergence of a large middle class, a capitalistic system and the potential for a democracy to take root are all good things. We shouldn’t care if their standard of living rises as it only creates better conditions for the world’s inhabitants. The concept that we lose if they gain is best argued by negative people too lazy to work. Although they don’t enjoy the freedoms we have, how long will it take for this ever rising group to want them? They will be too large for the tyrannical system of Communism to control. What will al Qaeda or any terror group do to 1.5 billion people who share no common values with them? The rising standard of living will bring a rising cost of living and a rising currency. The economic advantage they have will evaporate. Jobs will come back here and they won’t miss them. Our productive advantage should sustain us. India will rise, too. Russia will be unable to maintain its status. Europe will be an also-ran. And most important, Lord Stanley’s cup will return to Canada. The world will be better again.
6/3/11 (c) 2011 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or e-mail firstname.lastname@example.org.