China's Growth

China growth to become the worlds leading economy

China’s Impressive Growth 2

All abroad take a profitable ride on the orient express! Just as the inner-city transportation

express trains gets thousands of commuters to their destination more rapidly than the local train.

The express train does so by-passing all local stops and goes to the most traveled destination. So

too is there an express in our global economy, and U.S. companies are going abroad and taking

this train by-passing our local companies. Most Americans have grown accustom to value

shopping at stores like Wal-Mart, Target, and many others. The benefit of these low priced retail

stores has spoiled many Americans. Let’s face it we all love to go shopping. Many Americans

never think about the price our country pays for keeping our consumer goods prices reasonably

low. China the global economic engine is one reason for these considerably low prices. We need

China to keep prices low and keep our economy moving and our businesses profitable. But is

America putting profits before its ethics?

Manufacturing which is 15% of the U.S. economy is slowly withering away. China is producing goods at nearly half the cost of its leading competitors. This makes it irresistible or maybe even inevitable for foreign companies to manufacture their goods in China. As of September 2007 the minimum wage of Chinese workers is the equivalent of one U.S. dollar an hour. Although there is pressure from China on companies to raise the wage up to 95% it will remain a low-cost manufacturing machine (Biz China, 2007). China is definitely not the cheapest labor force in the world but it is in a docile, stable and reliable region of the world. These are some of the factors that make it appealing for most western companies to do their business in this region.

China’s Impressive Growth 3

Another factor influencing western companies is Chinas expanding workforce. Recently there has been a migration of millions of inland farmers to the mainland of China seeking employment. With the arrival of these workers China can expect an increase in their workforce and productivity. Already having a workforce of 789 million double the size of the United States population China is ever increasing its workforce. Of course not all Chinese workers are making this trek to mainland China. Western companies have come up with a solution to this problem; proposing to invest 20 billion in the inland region of the country for infrastructure. Projects like new highways, small airports, and rail transport will connect inland China with the port cities. The impression is that western companies are doing everything they can to develop this region to spur more growth. This exceptional expansion of the region is keeping China on a path to become the worlds leading economy (Justin, Fox 2007).

The need to service the 1.3 billion Chinese citizens is another opportunity for western investors. With government sanctions lifted this allowed foreign companies to move in and make enormous investments in China. The effect of these sanctions is U.S. companies are opening up in China to take part in this booming economy. Americans businesses see an opportunity to take part in a market of over a billion Chinese consumers. Set to open in China is Dominoes’ Pizza and Boston Chicken joining other American companies such as Wal-Mart, Kentucky Fried Chicken and Hard Rock CafÐ"©, to name a few. Some say that America does not sell in China. Do not tell that to Amway. Since its venture into China in1995, it has reported astonishing triple digit quarterly gains. These financial increases are not just limited to Amway. Avon opened its

China’s Impressive Growth 4

first cosmetic plant in 1996 with 85,000 sales agents scouring the region and racked up sales of 68 million dollars in 1996. With this flow of income one can see the attraction of these companies to relocate to mainland China. In fact half of America’s top 100 companies have some sort of presence in China. (Gluckman, Ron 2007).

American companies do not have to reside in China to benefit from their cheap production. One company that represents this fact more than any is Wal-Mart the world’s largest retailer. If Wal-Mart was its own nation it would be number eight on the list of trade partners with China. In fact 70% of Wal-Mart products on its shelves are made in China. This is according to Wal-Mart Watch (2005) a center for community and corporate ethics. Is there something wrong with this? Wal-Mart feels its responsibility is to bring its customer the lowest possible price for consumer goods. Cheap products are good for U.S. consumers they allow us to have extra money to use on other things. This is a definite advantage of the trade with China but what about are factories at home? In order for American companies to produce products at these prices they will have to cut cost. They may have to layoff workers to cut down on expenses. Even with this American companies would lose out because there would be a decrease in production. Then there is the most obvious option to pack up and move there business to China. Or do the inconceivable and shut down the business completely.

The cheap cost of producing in China does have drawbacks for western companies. The effect of these counterfeit products making their way into U.S. markets is billions of dollars in lost

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