“If Clinton agrees to represent out product, then money is no problem at all,” said Li Chunhong, spokeswoman for a Chinese privately-owned clothing company. But, “we are still negotiating.”
Li was referring to the extraordinary effort of the Fapai Xifu Company to induce the former president of the United States to represent and model for the Western-style suits it is manufacturing in some 300 factories across China.
Last year, the company, based in the low-cost manufacturing hub of Wenzhou in eastern China, offered $2 million for Clinton’s help, and Li suggested an increase was very negotiable.
“We are targeting the European and American markets,” she said. “Clinton’s international stature and personal charisma should greatly boost our product’s appeal.”
After only seven years in operations, the little-known company already boasts $133 million in annual sales, and its market expansion drive may well exemplify the global ambitions of many Chinese manufacturers as the New Year ushers in bigger opportunities for growth.
That such ambitions would not be limited to low-end products was demonstrated by the recent $1.75 billion acquisition of IBM’s PC unit by home-grown Lenovo company.
Seismic shifts
Now a major engine of global growth, China is likely to induce further shifts in the global economy in the coming year as it captures a bigger share of world market.
Spearheading China’s expected surge is the country’s textile and garment industry, which involves 15 million workers and 300,000 factories. It is likely to dominate the world market after the lifting on Jan. 1 of trade quotas that were created by industrialized nations four decades ago.
That could mean cheaper and better clothes for the American and global consumer. But it also may trigger massive dislocation and pain, as tens of millions of jobs, most held by women, are threatened worldwide, according to Neil Kearney, a spokesman of an international garment and textile labor group.
The official Xinhua news agency recently reported that China’s foreign trade volume has passed the $1 trillion mark for the first time, placing China on track to become the world’s third largest trading power. It ranked fourth last year, behind the United States, Germany and Japan.
A forecasting model of the World Trade Organization (WTO) estimates that China’s share of the U.S. and world market could eventually soar to 50 percent. A Hong Kong-based executive even projected that some 70 percent of clothing production could move to China.
Could wipe out jobs elsewhere
In the United States, which has already lost over 300,000 textile jobs in the last three years, about 650,000 jobs, or almost the remaining textile industry, could be wiped out by 2007, according to a projection of the National Council of Textile Organizations, which represents more than 30 US textile companies.
Even before the devastating impact of this week's tsunami on parts of South East Asia, the region was bracing for an economic shock from China's entry into the market.
“In Bangladesh, one million women workers will lose their jobs,” warned garment workers’ leader Roy Ramesh Chandra during a recent international labor conference in Tokyo. “Many of them may have to join the ranks of sex workers for a living,” he said, according to media reports.
The looming Chinese dominance has prompted a desperate appeal from 72 trade groups in 36 countries for the WTO to keep the trade quotas until the end of 2007.
While the United States has indicated it isn’t in favor of an extension of the trade quotas, American textile companies have petitioned the government to consider discretionary “safeguard quotas.”
In line with WTO rules, the “safeguard quotas” would be intended to deal with “market disruption” caused by a possible flood of Chinese goods. The European Union has also called on China to exercise “moderation.”
“We will adopt a responsible attitude,” said Chinese Vice-Foreign Minister Zhang Yesui earlier in December.
To pacify a growing chorus of alarm, China has just announced a set of measures, including export tax, to control its volume of exports.
Surge expected to continue
While textile trade controversies could flare up in the coming year, many observers are in broad agreement that China’s economy can only continue to surge and pull in even greater foreign investments, manufacturing and outsourcing business.
It will have attracted some $60 billion of new foreign capital by the beginning of the year, according to official figures, solidifying its position since 2003 as the top destination for foreign investments.
U.S. retail giant Wal-Mart, which obtained some $15 billion worth of goods from China last year — making it China’s tenth trading partner — has indicated even bigger procurement plans. It is also planning to open up to 15 stores, on top of an existing 40, next year when the government lifts curbs on foreign retailers.
Already a major producer of consumer electronics, China is also moving up the high-tech, high-value-added chain, with potential global fall-out.
“China’s capacity will have a big impact,” warned Morris Chang, head of the world’s largest manufacturer of customized integrated circuits and computer chips in Taiwan. He recently predicted that China’s production will unleash a global recession in the semi-conductor industry in 2005.
‘China price’
“China price” has become the newest buzzword among economists, as they try to fathom China’s awesome ability to force down the value of work in any job that is at all transferable, and thus induce the massive global shifts of manufacturing and investments.
The term refers to the price that American suppliers to other American businesses increasingly have to match to keep their customers and stay competitive with Chinese manufacturers.
A major underpinning in China’s ability to keep prices low is the immense supply of labor there. “If all U.S. jobs were moved to China, there would still be surplus labor in China,” pointed out Sandra Polaski in a policy brief for the Carnegie Endowment for International Peace.
Even U.S. automakers are now asking for the “China price” from their suppliers, who have come under pressure to relocate production to China or find China-based subcontractors, according to complaints noted by the Chicago Federal Reserve Bank.
The power of “China price” and the economic leverage it has engendered is also generating geo-political clout. In July next year, China and the 10-nation Association of Southeast Asian Nations (ASEAN) will begin mutual tariff cuts as they build a free-trade zone with a combined market of over 2 billion people by 2010.
The creation of the free-trade zone is “part of a Chinese strategic plan to project its influence in Asia, to outflank Japan and match the presence of the U.S.,” commented Singapore’s Strait Times. “But who minds?”
Challenges ahead
Many analysts point out that China is still faced with enormous challenges that could abruptly reverse its fortunes, with the worsening gap between the rich and the poor, a bubble economy and a fragile banking system overloaded with bad debts as potential trigger of crisis.
“We would not be able to support China if it failed,” Christian Hauswedell, Germany’s top diplomat for Asia Pacific, told the New York Times recently.
In a recent review of the world situation, Ma Zhen Gang, international affairs analyst, called China’s rising influence as “global and enduring.”
It is “irreversible and it is only natural that the Chinese people are happy and proud about it,” concurred Zhou Gang, a former Chinese ambassador to India.