China props up US economy: Wall Street Journal

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Last updated at: (Beijing Time) Thursday, February 05, 2004

China props up US economy: Wall Street Journal

China's fast growing economy provides powerful support to the US economy, a front-page article of the Wall Street Journal said on Friday.

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China's fast growing economy provides powerful support to the US economy, a front-page article of the Wall Street Journal said on Friday.

China is gradually emerging into the US-led global economic order, the article pointed out. As an important link in the whole economic ring, China has helped many foreign companies to earn money. Meanwhile, China also met the US huge demand for cheap goods and capital.

China has beyond doubt become a major economic force. Compared with the economic scale of 10.40 trillion dollars of the United States and the USD 4 trillion dollars output of Japan, China's present USD1.20 trillion dollars economic level is by no means high; but China will overtake Japan within a score of years. China's ceaseless growth of economic strength, including its large demand for crude oil, has made Beijing quite an influential city in geopolitics and a power center that must be faced squarely by the United States.

The average monthly income of Chinese workers stands only at around 80 US dollars, the article said, even less than the minimum income of two days for an American worker. This has incurred a drain of working posts in the US manufacturing industry. In the latest twelve months, cheap labors had earned China a trade surplus of 123 billion dollars to the United States, five times the figure as seen over ten years ago.

However, these figures covered up a fact, the mutual complementarity between the Chinese and American economies, the article pointed out. According to the World Bank estimation, China depends heavily on its industrial output, with 51 percent of its GDP coming from manufacturing, mining and other related industries. While in the US GDP, manufacturing only accounts for 14 percent while service industry almost takes up three fourths of it.

Chief economist of Morgan Stanley Stephen Roach believes that the United States could reduce imports from China by raising tariff or pressing RMB to revalue, but this can only help boost export to the United States by other countries.

The article cited the example of Logitech International to show how China has strengthened the US role in leading the global economy. The California-headquartered Company has a plant in Suzhou of southeast China, which exports to the United States 20 million mice every year. The Wanda wireless mouse is one of Logitech's knockout products. It is sold at around 40 dollars for each in the United States out from which Logitech takes away 8 dollars, wholesalers and retailers take 15 dollars, and Logitech's material providers, such as Motorola Inc. and Agilent Technologies Inc. take 15 dollars too. China only earned 3 dollars out of it, and the money must be used to cover workers' wages, energy, transportation and management costs. The total income of Logitech's 450 sales persons in California is much higher than that for the 4,000 Chinese workers in Suzhou plant.

Out from many cases the result is always the same: foreigners got the lion's share. They provide raw materials, got them assembled in their plants in China and sell them overseas. Over three fourth exporters of China's hi-tech products are foreign companies. Motorola Inc. and Seagate Technology, both being American companies, are listed by the Ministry of Commerce among the top ten of the export enterprises.

It is hard to estimate how much on earth American transnational Incorporations have earned in China, for many of them reported profits through their offshore companies located in Hong Kong or other low-tax regions. But statistics from the US National Bureau of Economic Research could only offer a general impression. In the 1980s, the US companies lost much in China; in 1990s they began to earn a little. By 1999 they reported a net income of their related enterprises in China up to 755 million dollars, while the figure doubled by the third quarter of 2003. Taking the income of the related enterprises in Hong Kong, the US companies earned an income of 5.16 billion dollars during the first three quarters of 2003 in the big China region, equivalent to the income gained from Japan during the same period.

As Professor Huang Yasheng from MIT put it, "Americans hit a very successful business and produced numerous low value-added products in China. But this is a miracle in terms of quantity, not value��while getting cheap goods from China, Americans also got loans at an extremely low interest rate from the country".

By People's Daily Online

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