Mitos de China

1. Mitos de China Ing. Ignacio J. Vázquez Elliott Centro de Comercio Detallista ITESM, CSN Cortesía de: www.symbio-group.com

2. CHINA DE-MYSTIFIED OPPORTUNITIES FORTUNE FAVORS THE BOLD “SILK ROAD 2003, UNDERSTANDING CHINA IN A GLOBALISING WORLD”

3. CHINA DE-MYSTIFIED “There is this idea that China is incomprehensible. This is something the Chinese encourage. Chinese people like to think of themselves as being completely different to everywhere else.” -Adam Williams, Chief Representative, Jardine Matheson ; novelist, Sunday Morning Post. H.K. 10/26/2003

4. CHINA DE-MYSTIFIED • Social Myths • Political Myths • Economic Myths

5. Social Myth #1 “A phoenix rising”: China is a new emerging superpower

6. Social Myth #1: “A phoenix rising”: China is a new emerging “superpower” • The Real Story: • Historically a “superpower” nation • Long civilization • Robust recorded history • Most families can trace roots back 800 years • The Great Divergence: Western Europe and China “China is a much richer country than any part of Europe,” -Adam Smith , “The Wealth of Nations” , 1776

7. China has historically been a “superpower” nation in the world China’s GDP as % of the world, dominant in 90% of the last 2000 years The entire world economic order was – literally – Sinocentric until the 18th century. Christopher Columbus and after him many Europeans up until Adam Smith knew that. China’s balance of trade and payments surplus continued into the early 19th century. -Andre Gunder Frank, Global Economy in the Asian Age,University of California Press, 1998 China Others Europe/US 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100 1000 1500 1600 1700 1820 1978 2000 Year, AD - Deutsche Bank Based on US $ of 1990

8. China has a long civilization “China is essentially a country of history and culture” “Chinese civilization… has remained recognizably the same in essentials and is thus the oldest continuous, major culture in the world today.” - W. Scott Morton “China, Its History and Culture”,1995 Did you know… • The Xia Dynasty began in the 2200 BC and has an extensive and well-documented history • The Qing Emperor united 7 existing countries, written languages, currency, roads in 221 BC • China printed books several hundred years before the Gutenberg Bible • Chinese landscape paintings emerged as a form of art several hundred years ahead of Europe

9. China has a robust recorded history “Details of life in the second millennium B.C., conversations of the sixth century B.C., and letters of the first century A.D. and the like have been preserved, and thousands and thousands of local gazetteers about local conditions have been published by prefectures and counties for centuries.” - Wing-tsit Chan, Professor of Chinese Philosophy and Culture Emeritus, Dartmouth College,1995 Written language “Oracle” used 20th~15th century B.C.

10. But in the 16th century, China and the West took two very different courses While the West experienced… …China went the other way and shut its door to the outside world • Industrial Revolution • Religious reform • Renaissance • Emergence of the US • Starting in 1434, Ming empire halted the great maritime expansion • Ching Emperor made “craftsman” and “merchant” the lowest professions for Chinese citizens • Ching Emperor told King George III that China had “no use for your country’s manufactures” “The ancient Chinese ship sailed off the course of the world’s mainstream of wealth” - Hu Yung, Chinese Academy of Social Sciences, 2003

11. Social Myth #2 “Everyone looks alike”: China has a homogeneous culture

12. Social Myth #2: “Everyone looks alike”: China’s culture is homogeneous • The Real Story: • Multiple ethnicities, religions and philosophies • The Chinese Union • Country that shares the most borders • Middle Kingdom as a melting pot As early as three thousand years ago, Hebraic and Iranian religions ideas are practices traveled eastwards on the Silk Road, to be followed centuries later by the great missionary tradition of Buddhism, Christianity, Manichaeism, and Islam. And no religion emerged unchanged at the end of the journey. -Richard C. Foltz, “Religions of the Silk Road”, 1999

13. China officially has 56 nationalities

14. China shares its borders with the most countries

15. CHINA DE-MYSTIFIED • Social Myths • Political Myths • Economic Myths

16. Political Myth #1 “The East is Red”: China is a rigid communist state

17. Political Myth #1: “The East is Red”: China is a rigid communist state • The Real Story: • “Socialist Market Economy with Chinese characteristics”: China has a special system • Communism is a localized Western import • China has deep roots in Confucianism • Reforms: “Black or white, a cat that can catch mouse is a good cat” – Deng Xiaoping • Economic, political and social reforms are taking hold

18. China is not a traditional “communist” country “China today is affected in a special way by the West because its Communist ideology is rooted in the French Revolution, in the labors of Karl Marx writing in the British Museum in London, and in the blood of Russian Revolution. “Communism is, to begin with, a Western product.” - W. Scott Morton “China, Its History and Culture”,1995

19. China’s system is heavily influenced by Confucian values • Part of the national consciousness of the Chinese • The chief virtues are: • Courtesy • Tolerance • Good faith • Diligence • Moderation • Kindness • Bravery • Filial piety

20. China’s system is a unique blend of Eastern and Western values “Because of communism and Confucian beliefs in education, China has a better educated population than anyone else in the developing world. China’s advantages are many. Communism and a Confucian culture have reinforced each other’s interest in education. China is both better educated and more broadly educated.” -Lester Thurow, “Fortune favors the bold, what we must do to build a new and lasting global prosperity”, HarperBusiness 2003

21. China economy is moving from being centrally planned, to market-driven • Changing economic mix • Less reliance on state-owned enterprises • Greater emphasis on private enterprises

22. China is reforming politically, including experimenting with democratic principles • Transformation of government functions to separate enterprise operations • Government by laws • Enhance legislative functions • Enforce law with power • Independent supervision of law enforcement • China is gradually introducing limited democratic reforms • Party officials have been encouraged to debate and even critique the work of top leaders • Multi-candidate elections, though, are held only in villages

23. The effects of social reforms are beginning to manifest themselves • Real GDP has grown an average 9.4 percent a year since 1979. • China’s growth performance stands out against the enormous structural transformations and external challenges. • Using the official poverty line, the number of poor people is estimated to have fallen from about 200 million 1981 to 34 million in 1999. • Using the World Bank’s $1/day consumption measure, the number of poor declined from 360 million in 1990 to 223 million in 1999 (and 161 million in 2002) Growth Poverty -“ Promoting Growth with Equity, Country Economic Memorandum for China”, World Bank, 9/2003

24. Political Myth #2 “The Dragon is ready to strike”: China is a threat to the world

25. Political Myth #2: “The Dragon is ready to strike”: China is a threat to the world • The Real Story: • Protection of sovereignty • The “sweet and sour” effects of China • Piracy in China Unfortunately, China is more feared than emulated because it has the size to be everyone’s major competitor in the third world. -Lester Thurow, “Fortune favors the bold, what we must do to build a new and lasting global prosperity”, HarperBusiness 2003

26. Protection of Sovereignty

27. China’s “sweet and sour” effects on the world In general, commodity exporters and exporters of sophisticated goods and services gain, while other labor–abundant countries lose. -Martin Wolf, “The world must learn to live with a wide-awake China”, Financial Times, 11/12/2003

28. CHINA DE-MYSTIFIED • Social Myths • Political Myths • Economic Myths

29. Economic Myth #1 China’s economic growth is a modern miracle

30. Economic Myth #1: China’s economy is a modern miracle • The Real Story: • Following same pattern as other Asian countries • Difference from other Asian economies such as Japan and the NIC’s • Although a large economy, not going to be a “rich” country • What keeps China awake at night?

31. China is following the same growth pattern as other Asian countries All of the successful economies of East Asia in the last half century have followed the Japanese pattern. Starting with large labor forces, they organized themselves to produce very high savings rates so they could afford massive investments in new capital equipment. China, with its internal savings rate of 30 percent, is only the most recent example of a country on this path. -Lester Thurow, “Fortune favors the bold, what we must do to build a new and lasting global prosperity”, HarperBusiness 2003

32. At the same time, China is very different from other Asian economies, like Japan • China has largely avoided mercantilism of Japan and other Asian countries, resulting in a more open economy • Foreign manufacturers of autos, telecom equipment, and computers dominate the Chinese market • In 2002, the stock of FDI in Japan was only $60bn, compared with $448bn in China • While China has a large trade surplus with the US, overall trade is not far from being balanced. • 12 months to April 2003, overall surplus was $36bn • According to IMF, its current account surplus this year will be only some $19bn.

33. Even if China becomes a large economy, it won’t be a “rich” country Global Repositioning Estimate of world’s largest economies in 2050 Trillions of Dollars • Even if China’s GDP increased 600% in the last 23 years, China’s 2002 GDP is only 1/4 of Japan’s, which has gone through 10 “lost” years. • In 2000, GDP per capita was $848, compared with US’ $29,240, Japan’s $32,350. -Goldman Sachs & Co. BusinessWeek 10/27/2003

34. The income disparity is not yet critical, but has not improved Income Disparity : Not Yet Critical, But ……... 1999 GDP Growth Rate Per Capita H/L Ratio 1980-90 1990-00 GDP (RMB) Eastern Region • Shanghai (H) 30,805 7.4 12.2 • Guangxi (L) 4,264 7.2 7.2 11.6 Central Region • Heilongjiang (H) 7,660 6.9 8.4 • Jiangxi (L) 4,673 1.2 8.8 11.7 Western Region • Xinjiang (H) 6,653 11.1 9.7 • Guizhou (L) 2,463 2.7 9.5 8.7 -“China’s Economic Outlook, 2003 and Beyond”,MasterCard International, 7/2003

35. There are vast differences between regions in China • 6 provinces in the coastal zone account for • 80% of exports • 89% of export incomes • ¼ of total population (about 338 million) • Per capita export of US$762 • Infrastructure development in the interior • Accelerate urbanization • Average labor cost in the mid & upper Yangtze River Valley is 30-50% lower than the coastal region -“China’s Economic Outlook, 2003 and Beyond”,MasterCard International, 7/2003

36. Economic Myth #2 China is a third-world country

37. Economic Myth #2: China is a third-world country • The Real Story: • Fastest advancing infrastructure • “Great leap forward”: Generational leaps in technology • Phenomenal eBusiness and wireless growth

38. China has the fastest advancing infrastructure NOTEWORTHY FACT: Shanghai is the first city in the world to have a Maglev train China’s financial capital Shanghai was the first city in the world to build a magnetic levitation train – the most advanced train in existence. • China’s has many transformative infrastructure projects • China is developing into an energy powerhouse • Transportation lines are expanding at dizzying rate NOTEABLE QUOTABLE: “China is definitely becoming a good model in developing its infrastructure” - Heinrich von Pierer, CEO (Siemens) - Economist, CCW Research, 3J Research, Symbio

39. China’s use of technology is growing at a phenomenal rate Unit:1000 Users -IT Time Weekly, Beijing China 10/20/2003

40. Economic Myth #3 “China is responsible for Western job losses”: Like other Asian economies, China is a net exporter

41. Economic Myth #3: “China is responsible for Western job losses”: Like other Asian economies, China is a net exporter • The Real Story: • China imports a great deal • China actively involves foreign participation • China is losing even more manufacturing jobs than the US

42. China imports a great deal China imports more than Japan, even though its economy is one-third of the size. U.S. shipments rose by over 20% in the first seven months of this year . -BusinessWeek 10/23/2003 This year China has gobbled up foreign goods at breakneck speed. This has made China the largest contributor to export recovery in Asia, supporting global growth. -Financial Times 11/11/2003

43. China actively involves foreign participation “In China, there are so many talented workers and engineers, and we need to be part of China to better understand the local market” - Guy Sene, Vice President Agilent Technologies Abundant inflows of capital are a catalyst for management know-how and technology innovations • Foreign Direct Investment (FDI) has totaled over $50 billion every year for the previous 3 years • $52.7 billion in 2002; pledged FDI of $82.7 billion for 2003 • Over 100 R&D centers in China owned by large tech multinationals • Over $100 Billion invested to date in R&D centers • Expected to double by 2005 - Wall Street Journal, Dow Jones Newswires, World Bank

44. China is losing manufacturing jobs as well It's a global trend that manufacturing jobs are decreasing, even in China. Special attention to be paid to the fact that although the US lost 11% of the jobs, but this percentage is still smaller than the 20% in Brazil, 16% in Japan and 15% in China. - Wall Street Journal, 10/20/2003

45. CHINA DE-MYSTIFIED OPPORTUNITIES FORTUNE FAVORS THE BOLD “SILK ROAD 2003, UNDERSTANDING CHINA IN A GLOBALISING WORLD”

46. Opportunity #1: East Asia is becoming one common market: (ASEAN + 3 Agreement) • More Chinese goods in India, Indians working in Tokyo or Kuala Lumpur – flows of people and ideas • Intra-regional trade – in services as well as in manufactured goods – is growing rapidly. • In contrast to the European Union or North America, companies and investors, rather than governments, are the driving force

47. Opportunity #2: China as a production base • Workshop of the World • Increasingly an R&D center FACT: Chinese cars that cost as little as $6,000 will arrive in the United States before long.

48. Opportunity #3: China as a market for localized products and services • Durable goods and raw materials • IT products • Fastest rising per capita incomes • WTO pressures for Chinese companies “The basic direction of China’s economic development in the first 20 years of the 21st century is for industrialization, urbanization and marketization. -Wang Mengkui, Director of the State Council Development Research Centre, 2003

49. Durable goods and raw materials comprise the largest sector of the market - UBS Investment Research, Asian Economic Perspectives, 9/29/2003

50. The sector for IT products is becoming one of the largest in the world NOTEWORHTY FACT: Most major industries and sectors in China will accelerate IT spending this year • China’s purchases of IT hardware, software and services reached nearly $14 billion in 2001 • China already leads PC sales growth and volume in Asia, and will become the second largest market in the world by 2006 • China will become Intel’s largest customer this year - People’s Daily, CCID Research, Ministry of Information Industry, CCW Research