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RSI Executive Search Firm Company Newsletter, November 2010

Issue: #31
Date: November 1, 2010


China’s Economic Threat PDF Version
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This Month in the RSI Newsletter
» China’s Economic Threat

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China’s Economic Threat

China’s growth is predominantly based on exporting cheap manufactured jobs. Because of this, whole manufacturing industries, including clothing and electronics in the United States have moved their operations straight to China. By moving these corporations to China, they are able to export jobs to other countries (many times in Asia and Africa) for lower labor costs. This country’s efficiency makes it difficult to ignore the rise of Chinese manufacturers as competitors for U.S. companies. China is built on thousands of years of hard work, which makes it understandable as to why they now prove a great economic threat to the United States. Morgan Stanley’s, Andy Xie predicts that “within a decade China promises to become the world’s largest trading nation.” Although China poses a threat to today’s economic order, it also harbors many opportunities.

The problem the United States currently faces is that many of its successful high-tech companies, which are literally starting-up in American garages, are being scaled-up in Asia. The main threat to the United States is the reality that China has all of the characteristics needed in order to become an economic superpower in the world. China’s large population and strong military makes it one of the most intimidating countries in the world today. Although China is growing enormously and has all of these powers, in both an economic and demographic sense, it continues to run into critical road blocks. These obstacles are keeping this large country from becoming the world superpower today.



 

 


Continued...

Freedom Needed to Spark Imagination

People often draw similarities between the Soviet Union and China, both socially and economically. Like the Soviet Union, China is one of the only nations that can somewhat threaten the United States military. China is also a little behind, compared to the rest of the western world, on sparking imagination and innovation from its people. The freedom of imagination is hard to achieve coming from a communist-run country. China’s government dictates many aspects of their people’s lives, which contributes to lack of modernization necessary to attain an “economic powerhouse” status. Although this is the case, the United States still sees China as a financial threat because of their ongoing efficiency in production.
Individual vs. Country

Even though China is currently making an unthinkable amount of money, barely any of these earnings are actually trickling down to the Chinese people. Andrew Batson of The Wall Street Journal stated how “China's government has repeatedly said it will do more to boost consumer spending and cut its trade surplus, but those pledges haven't been backed up with many concrete changes.” Consumer spending is extremely difficult to boost when the consumers have no money to spend. In addition, the country’s population is aging and not balanced because of the current one-child policy. In China, the women are outnumbered by men, thus stalling the natural reproduction cycle. Because a fair amount of China’s population will be over 60 years old within the next decade, there will be a drastic rise in healthcare costs. This is a very interesting figure because this part of China’s populace will have a heavy, costly impact on their economy.

 

 

 


Continued...

China’s Future

Many researchers and analysts believe that China does not yet have the capabilities to become a powerhouse country, especially if they continue to run their nation in the same manner. Not only is China facing issues with innovation and population growth, but they are also heading towards an era of even more political tension, which could possibly become another road block in reaching the world power status they are attempting to achieve. The issues with Tibet, Xinjiang, and these peoples’ movements to obtain freedom, threatens to tear the country apart. If this happens, China will need to focus on their internal problems instead of concentrating on becoming the world’s top challenger.

 

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