- DAVOS, Switzerland -- Over
the last several years, I have noticed and talked to a number of Chinese
reporters at numerous global meetings. I have been impressed with their
knowledge and ability to rapidly switch from their mother tongue to English,
German, French or Italian. Some might even speak two or three additional
languages. At the September 2003 World Trade Organization in Cancun, China
along with Brazil and India helped to form a counter group to the developed
countries. Here at the World Economic Forum, the word "China"
evokes dollar signs. As one Asian businessman said, "Chinese assets
in 2004 is good monkey business" (this is the year of the monkey).
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- The following is about some very serious monkey business.
At a workshop devoted to China, Secretary of Commerce Donald Evans pointed
out President Bush has been to China twice and he fully supports China's
integration into the global market. China has an average household savings
rate between 30% to 40%. The total amount of household savings equals
100% of GDP. Our savings rate is between 8% to10% of GDP. It is true
that without American spending, the rest of the world would not have jobs.
The fact that Americans love to consume and that the multinational corporations
have slick marketing ads to tell us what we should look like, how to dress,
where to live and what to drive, says it all. Furthermore, Americans no
longer keep the bulk of their savings in banks but use the stock market.
In another workshop, MorganStanley economist Stephen Roach bashed Americans
for not saving in the bank. When I asked him about the fact that there
has been a very strong commodification of assets into the stock market
and that most American have been told to invest in the market using mutual
funds, he debunked them using the stock market because of the Nasdaq crash.
- The truth of the matter is Americans don't invest in
banks any longer because in 1980 the government passed a law that took
away the limit as to what a bank had to pay. Instead, they allowed banks
to pay what the "market" would bear. Banks tell us that the
market will now bear
- 1% to 2% on savings and certificates of deposit and charges
9.99% to 21.99% on credit cards. Mr. Roach should know that without these
foolish Americans, he would not have a job.
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- However there is another point to be made with regard
to consumers using the bank to save. When the government needs funds, they
borrow from the banks (your savings and mine). Because Americans don't
save there anymore, it creates a problem for our government to bridge the
gap between income and expenses. Instead, they now have to rely on the
Japanese and Chinese to buy our Treasury bonds and mortgage backed securities
in order to help fund the more than $150B a day the government needs which
acts as a line of credit between our income and our expenses.
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- Another question that this workshop asked was, "Can
you make money in China?" The answer is "Lots." The CEO
of Nissan, Carlos Ghosn, said that operations needed to be managed very
well but it can be very profitable. Furthermore, he said China was second
to the U.S. markets in terms of profitability and that profits are also
higher than Japan or Europe. Another businessman, Ulrich Schumacher, President
and Chief Executive Officer of Infineon Technologies in Germany said that
there was not a problem to making money in China and that the timing was
right to do it now. He said China has a high level of technical response
and their skills are extraordinary. Furthermore, they work three-12 hour
shifts, seven days a week boosting productivity over the average German
worker who wants the weekends off.
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- Now why is China so profitable? It is no secret that
their people are being paid slave labor wages to work in their factories.
With 1.4B people, their slave labor benefits all the countries of the world,
thus undermining economies with higher paid employees that are forced to
downsize, outsource, privatize and reduce wages. China's average wage is
20% of what is being paid to workers in Malaysia and Taiwan and 10% of
what is being paid to workers in Singapore.
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- Currently there are 200 million Chinese who need to be
absorbed into the global workforce. This equates finding jobs for the
entire U.S. or European workforce! Think of the kind of consumer spending
that will have to be generated by the new emerging market countries like
India in order to provide jobs for 200 million people! Think of the imbalances
that will create in the U.S.! At every turn, more U.S. plants are moving
overseas. As this year opened, Levi Strauss, after 150 years of doing business
in America, moved its last U.S. plant to China. It use to be that the
troubled high schooler or less than college material kid found a job in
the factory and was able to make some kind of life for himself. That is
no longer an option. Working at McDonald's is about it.
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- There are those who say the East is going to invade.
I am not sure it is going to be a physical invasion as much as an economical
and psychological invasion. While our high school students can't read,
Chinese students have learned English and are becoming very IT savvy.
Currently, there are 60,000 Chinese students in America. One CEO said that
employees in China are fast, adapt well, are innovative and are like sponges
when it comes to learning.
- Are there downside risks to investing in China? Yes,
they like to copy and aren't concerned with intellectual property rights.
Furthermore, there are a lot of layers. One CEO said that it is possible
for your Human Resources Manager to be a member of the Communist party
and the Secretary of Health and Human Services.
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- With great excitement, Secretary Evans pointed out that
the "U.S. is simply trying to create conditions for long term monetary
growth. Those conditions that have made the U.S. most important economic
engine in the world-that is the key focus in China." My question
is, "At what price? Sovereignty? Jobs in America?" Just who
will be the monkey in the future?
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