Posted in Uncategorized, tagged business, Chinese currency, Dong, economics, RMB, trade, US Dollars, USA, USD, Vietnam on September 30, 2011|
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It is often difficult to speculate on the future of world trade patterns. Things change. There are many factors to consider. What appears to be a possibility in the next several years, however, is a movement away from western trade with China for trade with a country that offers cheaper goods. Perhaps, because of the decrease in the value of Vietnamese Dong relative to the increase in the value of Chinese RMB, we may see more trade with Vietnam and less with China. It is hard to say for certain; but, the consumer market will gravitate toward the cheapest products available. People will naturally move away from investments that show smaller gains.
While the Western economies are rather stagnant over the past several years, the Chinese economy has been making steady gains. The products that the west once got for cheap in China, are slowly becoming more expensive for us to purchase. Many of the goods that were once “ultra cheap”, are now just “cheap”. People who want the cheapest goods around will start asking themselves if trade with other countries, like Vietnam, will be more beneficial to western consumers than trade with China. If the possibility of “ultra cheap” can come from somewhere other than China, the market may naturally find its center there. If trade patterns begin gravitating away from the Chinese market toward the Vietnamese market, there is a likelihood that Chinese growth will slow, consumer goods in the west may get slightly cheaper, and the Vietnamese economy will begin rising.
Economic growth due to trade eventually has a tipping point. When growth leads to higher priced goods, trade patterns will naturally shift to economies that offer more lucrative consumer product possibilities.
It is only a matter of time before the Chinese economy reaches its tipping point and makes way for disinvestment. This disinvestment will eventually lead to a slower growing Chinese economy. Once the Chinese economy begins to decline again, investment will likely return if it offers the cheapest alternative. But one thing appears to be true of the nature of trade: Economic Growth depends on it.
Another factor to bear in mind in this regard is: Who will the west sell its goods to? Is it more beneficial to allow the Chinese economy to continue gains so that the West can sell its products back to it? Or will consumerist ideology allow for such mutual exchange? This is a complex question indeed. One that will surely define politics and economics in the years to come.
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Posted in Uncategorized, tagged China, economics, Global, industry, International, money, philosophy, Politics, trade, USA, West, world on January 25, 2011|
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For several years now China has been steadily gaining on the U.S. to become a major economic rival. A recent Foreign Policy blog posting by Joshua Keating entitled, “Did China’s Economy overtake the U.S. in 2010” ( http://blog.foreignpolicy.com/posts/2011/01/14/did_chinas_economy_overtake_the_us_in_2010 ) suggests that the Chinese economy overtook the U.S. economy in 2010. This is much earlier than what previous estimates had indicated. One interesting thing that was not mentioned in this article, however, is the growing amount of U.S. debt that China has purchased: China now owns, by some estimates, roughly 8% or near a trillion dollars in US debt; this is the largest single foreign holder of U.S. debt. With these statistics taken into account, it puts China at a major strategic advantage, economically. The industrial revolution that put the U.S. in it’s position at the top, is the very same industrial revolution that the U.S. (and Canada) has freely given to China. The cheap products we find at Walmarts etc. are the new riches of China; and the specter of the vanished western industrial base. The west is effectively transferring to China, the very economic power base that put it on top in the first place: the industrial revolution. So long as cheaper consumer products are available in China, Western manufacturing bases will vanish one after the other. U.S. gains in cheap consumer goods comes to the detriment of the U.S. as an international powerhouse. What was the major strength of the U.S. economy has, over the past 20 years vanished due to the ideas espoused in Neoliberal/Neoconservative ideologies and Globalization. Is it too late for the U.S. to reinvent its manufacturing base; or will countries who make the products cheaper like China, Mexico, and India take the lead in the world economy of tomorrow? Chances are, the U.S.’s decline will be long lasting and permanent if they choose not to recognize their grandest mistake. Once these “countries of tomorrow” make their big gains, what is holding their currencies from increasing to meet the U.S. currency in value? Where will the U.S. find its cheap products then? What will U.S. currency look like as their debt continues to grow to feed its hunger for the cheapest goods around?
-Justin Allen Philcox
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