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China has made significant progress in reducing extreme poverty. The country's growth model has been presented as a model for other developing countries. But the Chinese model is highly inequitable and vulnerable to new US trade policy pressures.
From 1990 to 2012, the number of people in China rose from 860 million to 145 million below $ 2.50 a day. In the aftermath of the 2008-2009 global financial crisis, China has been an important part of global economic growth. The country's strong demand for raw materials has contributed to the non-spread of the crisis in the south.
Such an interest arises in the poor world of the world and among the defenders of the South. Some see China as a challenger of American hegemony and a representative of an alternative to the neoliberal "Washington Consensus." The Trump government has responded to China's trade war challenge.
Over the 2014-2017 period, China had a trade surplus of more than $ 2 trillion. A little more than half of this profit came from the United States. On the other hand, US companies have gained a lot from China, while the Chinese central bank has invested its huge dollar reserves in US government bonds.
The former US governments were largely satisfied with these economic relationships, but not with Trump. His government is trying to reduce the trade deficit with rigorous instruments. China is accused of cyber-theft of trade secrets, pushing US companies to transfer technology and subsidize their own businesses. Washington has imposed penalties on imports from China, Beijing has responded by adopting countermeasures.
… but come home with something!
It is no longer sensational if the Chinese government organizes industrial espionage. Successful signaling states teach predecessors of legal and illegal instruments. In 1993, I was in Taipei, Taiwan, field for my doctoral dissertation. I met a Ghanaian in search of the secret of Taiwan's economic miracle.
One day, he had interviewed two bureaucrats in an economic planning agency. He said, "We sent our best people to Silicon Valley. Gave them a lot of money and let them have a good time. Men vi fortalt dem klart to de skulle komme hjem med noe. "
High investments led to growth
In addition to organized industrial espionage, China has also resorted to other "mercantilist" strategies similar to those of Taiwan – but also of South Korea and Japan – previously used in its industrial acquisition. However, in China, strong growth has resulted in one of Asia's most controversial income distributions, while neighboring countries have recorded moderate incomes. And while East Asia is known for its savings and high investments, China belongs to a special class. China's growth is driven by low-consumption investment and exports. Low consumption represents a large saving that finances a high level of investment, as well as capital exports.
Over the 2008-2017 period, China's savings ranged from 46% to 52% of China's national product (GDP), while Chinese households spent between 35% and 39% of their GDP. The share of savings was higher than ever in neighboring countries, the share of consumption was lower.
Much of China's policy of restricting consumption and imports and promoting savings, investment and exports is reminiscent of similar strategies in Japan, South Korea and Taiwan. In all countries, the exchange rate has been kept low to promote exports and limit imports. It has also inhibited the consumption of imported products. The deposit rate had been low for banks for a long time, while bank loans for housing and consumption were low. Selected investors received cheap loans at the expense of banks' interest and consumption. Compared with neighboring countries, however, China is characterized by slower growth in agricultural incomes and lower wage growth in the industry. This has lowered consumption and increased savings.
Net distribution between labor and capital
China's wage growth depends on productivity growth. Thus, growth is divided between labor and capital. While employees spend most of their income on consumption, most of China's savings come from capital income. Business savings is a big part here. Low wage growth and rapid growth in capital income limit consumption and promote savings. Weak wage growth is in turn linked to income growth in rural areas.
Productivity and incomes in agriculture increased rapidly at the beginning of the Chinese market reforms in the early 1980s, with the transition from collective agriculture to family farming and rising prices. farm. In addition, farm housing has increased their income by employing family members in new "small towns" outside of agriculture. However, later, the growth of agricultural productivity has declined. The liberalization of agricultural imports in the 1990s lowered the prices of agricultural products. The incomes of the rural population from small local towns declined when these firms were hit by a wave of bankruptcies in the late 1990s.
Until the early 2000s, significant tax credits from rural areas were also transferred to cities, while banks used rural savings to finance investment projects in the cities. cities. Between 2001 and 2013, the average income of the cantons was more than three times higher than that of rural households. From the 1990s and beyond, large groups of "migrant workers" moved from rural areas to cities to seek work. Many of them were working in the export sector. The large "supply" of rural workers has limited wage growth, especially for unskilled workers.
Gradually more advanced technologically
With rapid productivity growth, slow wage growth, cheap credit and low exchange rates, Chinese industry has become increasingly competitive and export-oriented. China has become the economic center of East Asia, which imported components and semi-finished products from neighboring countries and exported finished products to Europe and the United States. Export production has become progressively more advanced technologically. Much of this activity has occurred in value chains controlled by northern companies, particularly the United States.
China's growth model is profitable, dependent and vulnerable. He is now under pressure from the Trump government.
These companies have focused on research and development, high technology, design, brand development and marketing. Advanced components have been imported from neighboring countries. China still imports more than 95 percent of the state-of-the-art microchips used to produce computers and servers. Finishing and assembly took place in China, but were often organized by companies from neighboring Asian countries. In 2015, only two of the top ten exporting companies were Chinese. The other eight came from Taiwan or South Korea.
Lighthouse of Vulnerable Technology
In the 2010s, Chinese companies have developed a high level of expertise in the construction of high-speed railways, stealth aircraft, solar panels, wind turbines and smartphones. China has its international brand manufacturers. Lenovo became the world's largest PC manufacturer in 2013. Huawei and ZTE are leading telecommunications manufacturers in the international arena. But these industrial jewels are also vulnerable.
In 2018, the US Commerce Department declared a commercial boycott against ZTE, accused of violating the sanctions against Iran and North Korea. In May 2018, the company ceased operations. There was no way to find advanced technology alternatives from US suppliers. In June 2018, the boycott was abolished and ZTE was removed from the abyss.
China's growth model is profitable, dependent and vulnerable. He is now under pressure from the Trump government. Optimists can hope that this favors a more humane Chinese model.
This comment was posted for the first time on Bistandsaktuelt.no
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