When Globalization Works, Well...

China fascinates me. Right now China is a threat but in the longer term I'm not so sure. The question is can China move on from being a low-cost operator to being a true innovator? The figures speak for themselves. I read recently that the Chinese economy (GDP) grew by 9.5% last year and has grown from US $20 billion to US $250 billion over the past 25 years. A recent trend is Chinese firms buying US and European firms in an effort to fast-track development. Think about the CNOOC bid for Unocal, but also Lenovo's purchase of IBM's PC business, Haier's aquisition of Maytag and TCL's bid for Thompson in France. Have we seen this before? Maybe. Remember all the fuss about Japan Inc, the Asian Tiger Economies and even Germany a while ago. I guess every dog has its day, although China may be different due to its sheer scale. What can US firms do to remain competitive? - well not compete on price that's for sure. The answer must be innovation and China might not be so good at this. Innovation needs diversity and dissent and these are in short supply in China. On the other hand innovation also needs youth and the US and other 'Western' economies face a demographic melt down due to ageing populations so maybe the odds are even.

The USA does not face a demographic meltdown. The US has the fastest growing population in the industrialized world, faster even than China. China is the one facing demographic crisis. China is aging at a velocity never before seen on Earth. The fertility rate has dropped from 6 per woman in 1960 to 1.6 now. Thier population will begin declining within two decades. The US population is accelerating in growth, and will reach 420 million in 2050, possible over 550 million, and could reach 1.2 billion by 2100, while the other countries slow dramatically. The Chinese are smart, no doubt, but America ranks #1 in long term prospects for economic growth, according to many analyses, not China, not India, and not Japan.