Some people have been talking about it, many others have been ignoring it, the majority still haven’t got their heads around it but it is happening now.

When China began its current economic revival and subsequent march to power for most people, myself included, this was something unimportant. It was happening thousands of miles way on the other side of the world. In those dim and distant days – all of 5 years ago – the word ‘China’ was scarcely mentioned in the newspapers and when it was it would probably be with a small ‘c’ and more likely to refer to a set of cups and saucers than a country or nation so how could we know? Things have moved on since then and the ‘C’ word has moved from the occasional mention each year, to every week on the national news and now to almost every day. Most people are concious of China but very few seem to have grasped the dimensions of this phenomenon.
In the 1970s something similar happened in Japan and the impact is still being felt, but it would be enormous mistake to imagine that China’s rise to economic prosperity will be on the same scale, just another phase we can live through and then shrug off. There is a huge difference in the size and potential power of these two places which have implications for everyone. The population of Japan is not a great deal more than that of the UK so for such a small nation to have made such an impact is something of an achievement. But what if the same thing were to happen with China? Just consider the dimensions of China. It is not the largest country in the world but to travel from East to West, by train from Beijing to Kashi for instance, takes over 3 days and North to South would be something similar. Everyone knows the population of China, officially 1.3 billion [maybe more] – that’s 1,300,000,000 – but what we don’t seem to understand is that this is more than 20% of the world’s population. By comparison the UK has less than 1%. If everyone in China wanted a pair of rubber boots this year there wouldn’t be enough rubber to meet that demand, let alone keep everyone else happy. Even the slightest hiccup in China can have an impact on everyone else. If there is a statistical shift in China it will affect statistics on a world scale; if there is a similar shift in the UK it is highly unlikely anyone else will even notice. It is the enormity, and the differences in culture, of the place which has lead several western companies to come unstuck when dealing with the PRC as they have mistakenly treated it as just another minor player in the world.
For years we, in the west, have been happily closing down our factories and moving production lines overseas. The theory was that it was cheaper to manufacture in other places therefore the goods would be cheaper for us. Hong Kong [when it was colony], India, Malaya, Thailand, Myanmar have all played their part in this process and many still do but the ultimate move was to China with its never ending supply of un-unionised, unrepresented, unregulated and unprotected dirt-cheap labour. Until now many of the items bought from China have been designed, sourced and marketed by western companies, that way they could at least argue that they were keeping the biggest slice of the profit. Our retail outlets are flooded with goods with the ‘Made in China’ mark but branded with western names. The one area where the China economy is weak is in branding – how many of us can name a global Chinese brand. Answer, none; there aren’t any, well not up to now.

Another angle to consider is the value and power of the Chinese ¥ [Yuan]. At present it is seen as an undervalued currency and many western powers have been pressing the PRC to revalue the RMB. So far China has resisted such efforts. Another factor to consider is the rate at which money is saved in the PRC. At present the average Chinese citizen saves 40% of income every year – by contrast the average citizen of the UK is £3,175 in debt. Overall, China saved approximately 50% of GDP, about $1.1 trillion, in 2007, the US managed to save 13% of GDP, about $1.6 trillion, although the US economy is 6 times that of China. This pattern of behaviour is reflected throughout the Chinese economy with private companies and the government itself following suit, storing money for the proverbial rainy day. In recent weeks a Chinese company purchased a French vineyard, a modest move and not an earth shattering event in itself but something quite new demonstrating that China does have an interest in the world beyond its borders. What would happen – or should I say what will happen, as this event is now so close as to be almost inevitable – if the PRC waited until it controlled the biggest slice of manufacturing in the world and then re-valued the RMB, just as we want them to? This would certainly make Chinese goods more expensive for western countries, but, hey ho, why should they care, with manufacturing neatly tied up and under control their customers are certainly not going to do a runner, that simply wouldn’t be an option. More importantly, the RMB, combined with the reserves held by the PRC, would then have the power to enable the Chinese to wander the world and go on an acquisition spree. No need to limit purchases to crappy little vineyards, we could soon find that our railways, power companies and banks were owned by PRC Plc.

What happens when China finally makes its marketing breakthrough and begins selling goods manufactured in China, with Chinese brand names and sold on the global market as it surely must? I don’t know the answer to this question and I’m not convinced anyone else does including our dear leaders, I can only speculate and posit ideas but the thoughts which come to mind are not encouraging. Our share of the profits will diminish drastically, that much is certain, we will eventually reach a point when we can no longer expect to buy at such low prices from the PRC and we will not have the financial clout to ‘buy whatever the price’, and then what. We will buy from somewhere else? But where? There isn’t another country in the world which could take the place of China. India might have been a possibility but we had our fling in that subcontinent a while ago. While we have been sitting around admiring ourselves and thinking how savvy and successful we all are President Hu Jintao and his pals have been beavering away around the world developing relationships and securing resources for China’s future. Many of the rogue states of the world, which coincidentally hold the key to much of the mineral wealth of the planet, are safely in China’s pocket so our options are reduced yet further. I’m sure someone somwhere with a little more inside knowledge than myself could enlighten us further as what has been happening and what, in all likelihood, will happen soon. All I know is that I am typing this article while sitting at a desk in the UK, using a PC manufactured in the China, and sold with a Chinese brand name from a British retail store.
“Greetings, Master” in Putonghua [Mandarin to you and me] is “吾皇万岁万岁万万岁“; now might be a good time to start learning.