Just how significant is China as an emerging market? Prior to the 2008 global financial crisis leading investment bank Goldman Sachs predicted that China’s economy would surpass the United States’ by 2027. At current pace, with the US economy mired in debt and recession and China’s economy growing at a vertiginous 9.5%, the Eastern colossus could be No.1 well before then.
Western countries, the United States in particular, have traditionally been seen as the key destination for internationally-minded students seeking high-flying internships and work experience. As a result of the increasing shift of global economic power from West to East however, more and more graduates are setting their sights on China tipped to be the world’s next economic superpower. But haven’t we been here before? The Financial Times columnist Gideon Rachmann has suggested that the question of American economic decline is effectively the international affairs equivalent of the “boy who cried wolf” fable, indeed, the question of American decline is hardly a novel one. In the 1960s it was predicated that the Soviet Union would soon outstrip the United States in terms of economic power. The Soviet Union eventually collapsed due to its highly inefficient economic system which was kept hidden for years due to the fact that its manufactured goods never had to compete on international markets.
The most serious challenger to United States pre-eminence however, was Japan. Following its prodigious rise in the 1980s doomsayers once again began predicting the decline of the United Statesand the beginning of a Japanese century. Japan soon fell into recession in the early 1990s in what became known as the “lost decade” but for a time it really seemed like Japan might became the next centre of global economic power.
Am I suggesting that we are once again hearing the cry of wolf, but this time with China instead of Japan? Far from it, a closer inspection of US power vis-à-vis Japan in the mid-1980s and China today reveals an analogous but very different situation. Throughout the early 1980s the US ran a huge trade deficit with Japan which steadily deindustrialised the US economy. As jobs were being lost protectionist sentiments gathered ground in Congress culminating in the Plaza Accord in September 1985 whereby it was agreed to depreciate the dollar against the Yen in an attempt to make American exports more competitive and thus reduce the US’ trade deficit. The Japanese government of Yasuhiro Nakasone initially resisted the Plaza Accord out of a well-placed concern that it would significantly reduce their export competitiveness but eventually acquiesced due to the threat of losing access to the US domestic market. In other words, Japan needed the US much more than the US needed Japan.
Consider today’s parallel, the US is once again running a huge trade deficit, this time with China. Jobs are being lost and Congress has called upon China to revalue the remnimbi against the dollar in order to halt America’s manufacturing decline. As leverage members of congress proposed a 27.5% import tariff on Chinese goods which would significantly reduce China’s export competitiveness. Yet so far, this has not compelled China to revalue its currency as Japan did in the 1980s. One only needs to consider the present state of affairs where China’s economy is able to grow at a brisk 9.5% while the US and the Eurozone are in recession to recognise that China is not dependent on their export markets the way Japan was. In fact, with China’s current $2.5 trillion of foreign exchange reserves which it is currently using to buy up US Treasury Bills and Eurozone debt in order to keep both economies afloat, China is currently the only country keeping the world economy from going under. In this case, the West needs China much more that China needs the West. Moreover, unlike the Soviet Union,China’s manufactured goods compete on international markets, and they compete well. China also has demographic advantages on its side that Japan never had given that it encompasses a fifth of humanity, for Japan to seriously compete its citizens would have had to have been almost twice as rich as their US counterparts, this is not the case for China. The wolf has finally arrived.
Whilst nothing is ever certain in international economics, Chinais a far more serious competitor to the US than either Japanor the Soviet Unionever were. It is almost certain to become the next pre-eminent centre of global economic power. For this reason there has never been a better time for graduates to head East and gain valuable work experience in China. For many in the West however, Chinais an enigma, what is certain is that cultural knowledge and sensitivity are integral to workplace success in China. CRCC Asia was founded in 2006 with the aim of building a bridge between China and the global community and is designed to provide its clients with a wide-ranging insight into China’s economy and society. The internship program provides recent graduates with a “hands on” experience in a wide range of China sectors all of which will become invaluable in years to come. On current economic trends, increasing numbers of graduates are looking to China to start their careers as it will soon become the hub of the world’s leading industries and companies. There has never been a better time to enrol on CRCC Asia’s China Internship Program; the skills you will gain will be invaluable in years to come.
By James Curtis