Archive for the ‘globalization’ Category

Obama’s Biggest Challenge of All: China

November 29, 2008

The single most important challenge for the new administration—one with the potential to shape the 21st century—is China. As goes China, so go 1.3 billion men, women and children—one out of every five people on the planet.

China’s economy is now roughly half the size of America’s; in three decades, the two are likely to be about equal. What the Chinese eat, how much (or whether) they drive, where and how they choose to live, work and play: all will have an enormous impact on the availability and price of energy, the temperature of the planet and the prosperity of mankind.

By Richard Haass

Beijing’s foreign policy is no less important. A cooperative China could help stem the spread of nuclear materials and weapons, maintain an open global trading and financial system, secure energy supplies, frustrate terrorists, prevent pandemics and slow climate change. A hostile or simply noncooperative China, on the other hand, would make it that much more difficult for the United States and its allies to tame the most dangerous facets of globalization. But the emergence of a cooperative China is anything but inevitable. That is why Washington needs a new approach to Beijing. Think of it as “integration.”

In this March 31, 2008 file photo, a worker on a boat clears ... 
A  worker on a boat clears garbage from the Yellow River in Lanzhou in northwest China’s Gansu province. Newly released survey results show water quality along one third of China’s famed Yellow River has fallen below the lowest levels measured due to massive pollution. China’s second-longest river has seen its water quality deteriorate rapidly in the last few years, as discharge from factories increases and water levels drop due to diversion for booming cities.(AP Photo/File)

Integration should be for this era what containment was for the previous one. Our goal should be to make China a pillar of a globalized world, too deeply invested to disrupt its smooth functioning. The aim is ambitious, even optimistic, but not unrealistic. The United States and China need each other. Neither wants to go to war over Taiwan, to see another conflict on the Korean Peninsula or to see world oil prices quadruple as a result of a military strike on Iran. Even more than that, China needs access to the U.S. market for its exports in order to maintain economic growth and domestic political stability. Americans, in addition to benefiting from low-cost Chinese imports, need Beijing to manage its large dollar reserves responsibly.

Americans must accept China’s rise. There’s no guarantee we could prevent it anyway, and the attempt would only worsen the rivalry. We should not exaggerate China’s strength or the threat it poses. China’s military, for all its improvements, is still a generation behind America’s. And we should resist any calls to block China’s access to the U.S. market. Trade and investment aren’t just beneficial on their own terms; they also contribute to the web of ties that would bind China into an orderly world order.

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Chinese People's Liberation Army troops stand in their formation ... 
Chinese People’s Liberation Army troops stand in their formation at a parade ground during the annual rotation of military personnel in Hong Kong November 25, 2008.REUTERS/Alex Hoffard/Pool (CHINA)

Does China represent a threat or an opportunity?

November 6, 2007

EU Struggling with the trade issue with China…..

By Stephen Castle
International Herald Tribune
November 6, 2007

Of the many disputes that have strained ties between Europe and China, perhaps the most revealing arose over trade in light bulbs.

The tension over EU imports of cheap, energy-saving bulbs reached its peak this fall when the European Commission, fearing job losses in Europe, postponed plans to remove tariffs on Chinese-made products.

The debate that preceded this action illustrated just how much globalization has transformed international trade and the question that confronts Europeans and others: Does China represent a threat or an opportunity? As much as it pitted European interests against Chinese ones, the dispute also saw two European companies – and two sets of European concerns – clashing with each other.

The company lobbying hardest for an end to duties of as much as 66 percent on Chinese imports was Philips Electronics of the Netherlands, which manufactures many of its light bulbs in China and stands to gain €15 million to €20 million, or $20 million to $29 million, a year if trade barriers are removed. Its rival Osram, a German company that manufactures far fewer light bulbs in China, would benefit far more if duties stayed in place.

As the lobbying and bickering intensified, Osram even challenged Philips’s right to be considered a European producer of light bulbs because it outsourced so much of its production.

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In Northwest Georgia, Manufacturers Worry About China

October 24, 2007

By Jamie Jones
Dalton (Georgia) Daily Citizen

The United States will continue to be the dominant player in the broadloom carpet market, but domestic manufacturers must keep an eye to the Far East as China’s burgeoning economy continues to expand, a veteran floorcovering executive said Tuesday.“If China decides they want to enter the (broadloom carpet) market, watch out,” said Dan Frierson, chief executive officer and chairman of the board/director of Chattanooga-based carpet manufacturer The Dixie Group. “It doesn’t have to make economic sense. I think we have to be ever vigilant in watching that and seeing what they’re doing, but based purely on what is most likely to happen, I don’t think we’ll be sitting here in two or three years worrying about broadloom carpet imports.”

Frierson and Joe Williams, who has been Beaulieu of America’s director of international sales for the past two years, spoke about “The Challenges of Globalization” during a panel discussion at the opening of the FloorTek trade show at the Northwest Georgia Trade and Convention Center. The show continues through Thursday.

Williams said Beaulieu of America has been successful in exporting its floorcovering products, particularly to Australia and Europe. The main reason? Knowing the markets, he said.

“A product that works in the U.K. isn’t going to work in Germany,” Williams said. “It’s just that simple. You must have people in those countries that understand the market.”

Business is currently “soft” in the floorcovering industry due to a slowdown in the housing market, both in new construction and existing sales, and because of the escalating cost of raw materials. The third quarter of 2005 was the recent high point for the floorcovering industry, Frierson said. Since, the hardwood market is down 25 percent, the carpet segment is down 20 percent and the laminate market is down 15 percent.

“That’s a huge decline,” Frierson said. “We haven’t seen anything like that in our industry probably since the early ‘80s.”

Carpet and rugs are currently 12 percent of the U.S. floorcovering import market, but Frierson said carpet is only a small part of that after rugs, woven and wool products are taken out of the equation. Products such as tile and laminate are much larger components of U.S. imports. Low labor costs make China an attractive manufacturing location, but high costs of shipping and inferior infrastructure are detriments.

“I don’t think you have a critical mass (in broadloom) to build on as you do in the other markets (such as hardwood and tile),” Frierson said. “I still think you have a competitive advantage in the manufacturing of carpet in this country. Half of the broadloom carpet manufactured in the world is done here. No other country has the kind of scale it takes to be highly competitive.”

When asked if a foreign manufacturer could provide a low style product, such as beige broadloom carpet, to one of the large home improvement chains, Frierson said it could be a possibility.

“The good thing about the carpet industry is although Lowe’s and Home Depot are large sellers, they aren’t dominant like Wal-Mart of Target is with apparel,” Frierson said. “There are 20,000 retailers out there that you have to get placement on their floor, you have to service them once you get your product there. It’s a very different kind of business.”

The panel was moderated by Kemp Harr, editor of the monthly trade magazine Floor Focus. Two panel members were unable to attend: Michael Harris, chief executive officer and president of Minnesota-based Faribault Mills, and Richard Williams Sr., president and chief executive officer of Williams Companies.

China could use pile of cash to invest in USA

August 9, 2007

At the end of an easy-money era that buoyed and then battered both Wall Street and Main Street, one global market player stands out as noticeably flush: China.

Though still nominally communist, its institutions are sitting on a mountain of capitalist cash. Beijing now could spend some of its hoard on cross-border investments, taking advantage of market turmoil ignited by the mortgage industry meltdown.

“There is no doubt in my mind they would love to further buy into the U.S. financial sector, especially at bargain prices like these,” says Donald Straszheim, vice chairman of Los Angeles-based Roth Capital Partners.

Even after markets steadied Wednesday, some industries China is known to covet are attractively priced. The Standard & Poor’s investment bank and brokerage index, for example, is down 15% since hitting a 52-week high on June 13.

But any Chinese shopping spree is likely to trigger political controversy. In June, after China bought a $3 billion non-voting stake in the Blackstone private-equity group (BX), Sen. Jim Webb, D-Va., complained to Treasury Secretary Henry Paulson about China’s “undue influence” over national security contracts held by a Blackstone subsidiary. Likewise, a Chinese oil company dropped its bid for Unocal in 2005 after drawing fierce congressional opposition.

Since then, China’s cash stockpile — fueled by imbalanced Sino-U.S. trade — has only grown. Earlier this year, the Chinese government announced plans to use some of its $1.33 trillion in financial reserves to create a $200 billion state investment company. The country’s state-owned banks are well-heeled, and foreign investment by its leading corporations hit $16.1 billion last year, up 31% from the year before, according to Jing Ulrich, managing director of JPMorgan in Hong Kong.

Shares of one of the Wall Street names hardest hit by recent mortgage-related losses, Bear Stearns, are trading more than 29% below their 52-week high, meaning the firm “could be a potential takeover target” for one of China’s state-owned banks, said Fraser Howie, author of Privatizing China. In July, another Chinese financial institution, China Development Bank, bought a 3.1% stake in Barclays Bank of the U.K.

“I presume some part of China’s government will soon buy an equity stake in a major hedge fund or investment bank as well. … Anyone looking for financing to do a really big deal will, I would guess, soon make a pilgrimage to Beijing,” economist Brad Setser wrote recently on his RGE Monitor blog.

Renewed talk of China’s investment ambitions grew out of market upheaval that began with subprime mortgages, loans extended to borrowers with poor credit histories.

The market’s woes would be remedied if “China-based capital starts buying mortgage companies that it views as bargains,” CNBC’s Jim Cramer mused on-air Monday.

That possibility is regarded as far-fetched by China-watchers, including Straszheim, who says the residential-loan business holds no strategic value for Beijing. Likewise, government bureaucracy and lack of experience in cross-border deals mean China is likely to move slowly, says Rand’s William Overholt. It also means that the Chinese, like Japanese investors in the 1980s, may make some rookie mistakes. “Americans are going to make a lot of money out of these transactions,” he says.

Musharraf’s Obsolete Way

August 5, 2007

By Jim Hoagland
The Washington Post
Sunday, August 5, 2007; Page B07

Watching Pervez Musharraf perform brings to mind Fred Astaire. The Pakistani president tap-dances so nimbly across the world stage with such flair that you forget he is practicing a dying art.

Musharraf’s art is running a soft military dictatorship — albeit with civilian trappings — in a socially fractured Islamic nation that is a nuclear power and a key front in the U.S. war on global terrorism.

He has been dancing as fast and as skillfully as he can as he balances atop the most dangerous country on Earth.

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Pervez Musharraf
پرويز مشرف
Pervez Musharraf