World Trade - March 2009 - (Page 16) COVER STORY China Draws NEARER The world’s ‘factory’ is fast moving up the value chain to directly compete in foreign markets. BY JOSHUA KURLANTZICK O n an average weekday afternoon, the showroom in Bangkok for Huawei, China’s mobile telephone giant, seems less like a store and more like a subway at rush hour. Crowds of Thai teenagers in crisppressed school uniforms huddle over showcases of the latest-model phones, oohing and aahing over each function. Young professionals in slick suits debate how they can boost their salaries to trade up for better cells. In the near future, scenes like the mob at Huawei Thailand will become more common—and more worrying to Washington. Once content to draw in foreign investment and slowly build up domestic companies, today China, backed by its vast currency reserves, is beginning to invest abroad in large numbers. As part of this expansion, Chinese firms like Huawei, the automaker Chery, and many others are shedding their reputation for low-quality, no-name products, to compete head-on in the United States with American companies. Yet at the same time, the American public, and many of the major players in the Democratic Party, which swept the 2008 elections, are becoming more skeptical of trade with China, and free trade in general. And as Barack Obama assumes office, after eight years of free trade Republican rule, that skepticism could result in a rewriting of the free trade bargain America has, for decades, made with the world. Over the past decade, a dangerous convergence of factors has begun to threaten the future of U.S.-China trade. Besides making itself the workshop to the world, China 2009 has emerged as a major global exporter of its own branded products, in both low-end and high-end products, creating an ever-larger trade deficit with the U.S. (The U.S. will run a trade deficit with China of over $200 billion for 2008.) As recently as 2003, China’s total stock of outward investment was only $37 billion, less than that of the Netherlands. “You didn’t see much of a presence of Chinese businesspeople here even five years ago,” says leading Thai politician Kraisak Choonhaven. But over the past five years, that has begun to change. By 2008, China’s stock of outward investment had grown substantially—in just the first quarter of the year, Chinese firms invested nearly $19 billion abroad, a rise of over 300 percent year-on-year. And China’s low-cost manufacturing hubs, like the Pearl River Delta near Hong Kong, now control an overwhelming share of the world market in everything from toys to low-end electronics. “China has become the quintessential trading nation, whose international commerce dramatically increases its national power,” notes David Zweig, an expert on China’s trade and investment at the Center on China’s Transnational Relations at Hong Kong University of Science and Technology. As part of this global expansion, Beijing has enthusiastically embraced the idea of free trade. In just the past decade, it has signed or is negotiating trade deals with Chile, Thailand, ten Southeast Asian nations, the leading Persian Gulf countries, and many other states. As Zweig found, China’s trade has grown by an average of 15-17 percent annually for the past 30 years, a staggering figure. 16 WORLD TRADE MARCH
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