Chinamerica

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IN THIS SUMMARY
Within the past 10 years, China has evolved from a third world country into one of the most economically powerful countries in the world, second only to the United States. With China’s government-backed development of industry and excellent trade balance, they are on the path to passing the U.S. and becoming the most powerful nation on earth. The United States’ continuous outsourcing of jobs, weakening industries, and consumer focused culture are crippling the country economically and increasing the need for imports from China, further boosting Chinese industry. In Chinamerica, Handel Jones outlines what China is doing to further itself as an economic powerhouse, and what America can do to further its economic future while maintaining positive trade balances.

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Chinamerica

  1. 2. CHINAMERICA The Uneasy Partnership That Will Change The World AUTHOR: Handel Jones PUBLISHER: McGraw-Hill DATE OF PUBLICATION: 2010 262 pages
  2. 3. FEATURES OF THE BOOK Chinamerica would be most beneficial to individuals working in high-level positions within both corporations and the government. The book would also be beneficial to those simply wanting to learn more about the issues within the U.S. economy and the growing economic strength of China.
  3. 4. THE BIG IDEA China will become the next superpower, and that space can be shared with the U.S. or solely occupied by China, depending upon the United States’ future policy decisions China is making large, long-term investments in developing industries and infrastructure within their country. Their automobile industry is growing rapidly and their partnership with Taiwan will strengthen their hold within the computer industry.
  4. 5. INTRODUCTION Within the past 10 years, China has evolved from a third world country into one of the most economically powerful countries in the world, second only to the United States. With China’s government-backed development of industry and excellent trade balance, they are on the path to passing the U.S. and becoming the most powerful nation on earth. The United States’ continuous outsourcing of jobs, weakening industries, and consumer focused culture are crippling the country economically and increasing the need for imports from China, further boosting Chinese industry.
  5. 6. HOW THE UNITED STATES IS WEAKENING The largest threat facing the United States government is its ever-increasing personal and governmental debt. The U.S. has been using fiscal deficits to stimulate consumer spending in an attempt to pull the country’s economy out of recession, and there are currently no plans in place to reduce this growing deficit. The recession was caused by excessive leverage on the part of financial institutions loaning money to consumers in order to buy homes they could not afford, with the assumption that the value of the homes would grow faster than the properties’ debt load. This did not happen, and the U.S. government absorbed the losses in order to keep the financial institutions afloat, creating a substantial amount of government debt.
  6. 7. HOW THE UNITED STATES IS WEAKENING The United States was the global leader in semiconductor manufacturing in the 1970s. Now, while the U.S. still provides the information for the chips, it only has a small semiconductor manufacturing market that focuses only on the most complex types of chips, where their Asian competitors are weak. It is also important to note that the rate at which the U.S. is consuming chips is declining, while the rate at which the Chinese are consuming chips is increasing. This will result in strategic opportunities for chip companies working near and within China.
  7. 8. HOW THE UNITED STATES IS WEAKENING Overall, the United States seems to be operating on the idea that past success is indicative of future success. The world is changing quickly and what worked in previous years is not going to be applicable in the years to come. The U.S. needs to change quickly or else it will lose its standing as the current global economic leader, and China will take its place .
  8. 9. HOW CHINA IS STRENGTHENING In order to understand how China has been able to grow, it is essential to understand Chinese culture . The Chinese are both cautious and aggressive. They weigh in thoughtfully before making a decision, but once they commit to something they can be incredibly tenacious. According to Jones, it is also common in China for people to mask their true opinion until they feel that the other person can be trusted. Also, China has also been subject to many invasions throughout its 5,000 year history, which has resulted in the strengthening of its internal structures as a society. The citizens of China want to support China. At the same time, however, its citizens are very individualistic and driven to succeed. Competition is highly encouraged in China as a means to gain knowledge through success and through failure.
  9. 10. HOW CHINA IS STRENGTHENING In China, large companies are run or owned by the government. This makes it easier for China to manage their economy efficiently and effectively. They do so through successions of five-year plans that set specific goals for the nation to reach. A key part of these goals is the emphasis on local consumption from the future middle class. There are many engineers in top-level leadership positions in China. These engineers give input into what the goals should be and the actions needed to reach them.
  10. 11. HOW CHINA IS STRENGTHENING Even with the transportation budget increasing, transportation grids within large cites are being overwhelmed. Housing prices are rising due to the large amount of people moving to the cities for jobs, and the increasing prices are leading the workers to demand higher wages. In order to deal with this, China has created initiatives to encourage companies to create factories in smaller cities near the interior of the country. These relocations would ideally allow people to live closer to their hometowns, providing a more relaxed and enjoyable living environment.
  11. 12. HOW CHINA IS STRENGTHENING The growth of GDP in China due to the rise of its middle class will result in an increasing demand for steel, oil, copper and food, which will result in a conflict for resources with the European Union, the United States and Japan. China understands its need to ensure access to natural resources, and it is trying to gain ownership, or at least partial ownership, of companies that have raw materials. By buying these companies now, the Chinese are establishing their future supply base.
  12. 13. WHAT THE U.S. NEEDS TO CHANGE <ul><li>Jones states that the United States needs to turn around its economic and trade positions or else the nation will lose its place as the global powerhouse. In order to do so, the U.S. must focus on growing the wealth of the nation over an extended period of time. To ensure this happens, the U.S. must do the following: </li></ul><ul><li>Achieve a positive trade balance by reducing imports and increasing exports </li></ul><ul><li>Reduce large government deficits </li></ul><ul><li>Increase employment in service and manufacturing-based industries with export capabilities </li></ul>
  13. 14. WHAT THE U.S. NEEDS TO CHANGE It is also vital that the United States begin implementing the same 5-year plans as China in order to force politicians to look beyond their approaching election and into the long-term. On this note, metrics will need to be established that will provide clear benchmarks for the progress relating to the accomplishment of these goals. There should also be clearly established benchmarks for the value gained from exporting products, the employment levels in the United States as well as employee compensation levels, and the value gained from having high shares of local markets that will limit imports. This last benchmark is of particular importance because the values for exports and the values for local markets should be based on the total local contribution instead of total sales.
  14. 15. WHAT THE U.S. NEEDS TO CHANGE The U.S. government also needs to invest money in further developing the infrastructure of the country, particularly transportation systems, but also wireless broadcast communication capabilities . High commute times create stress and reduce productivity. People, goods and data need to be able to move quickly and affordably. The American railroad system is old and in dire need of repair. Meanwhile, China is investing $24 billion in creating a high-speed rail link between Beijing, Shanghai and Guangzhou. Europe, Japan, South Korea and many other countries have better wireless infrastructures than the United States, and unless the United States does something to improve it, they will continue to fall behind in wireless technology.
  15. 16. WHAT THE U.S. NEEDS TO CHANGE The U.S. needs to develop more fuel-efficient and low-pollution vehicles and can develop technology leadership by doing so. In 2009 the U.S. government gave loans to U.S. automakers to focus on advanced technologies, which is a start but not nearly enough. There is currently a lack of leadership in both corporations and the government regarding the strengthening of the U.S. automobile industry. Because of the massive size of the automobile market, it is essential that the U.S. be able to remain globally competitive in automobile manufacturing. This will require a change in thinking about the relationship between government and corporations as well as their roles as wealth yielders.
  16. 17. WHAT THE U.S. NEEDS TO CHANGE In the next 10 to 20 years it is very likely that there will be two world superpowers, the U.S. and China. However, if the United States does not change its current business and economic policies, then China may be the single superpower within the next 20 to 50 years .
  17. 18. Business Book Summaries is a product of EBSCO Publishing. The website is updated weekly with 4 to 5 new summaries chosen from among the top business books printed in the United States. For more information or to sign up for the weekly newsletter, please visit http://www.bizsum.com. ABOUT BIZSUM.COM

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