Is China Buying the World?
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China has become the world's second biggest economy and its largest exporter. It possesses the world's largest foreign exchange reserves and has 29 companies in the FT 500 list of the world's largest companies. ‘China's Rise' preoccupies the global media, which regularly carry articles suggesting that it is using its financial resources to ‘buy the world'.
Is there any truth to this idea? Or is this just scaremongering by Western commentators who have little interest in a balanced presentation of China's role in the global political economy?
In this short book Peter Nolan - one of the leading international experts on China and the global economy - probes behind the media rhetoric and shows that the idea that China is buying the world is a myth. Since the 1970s the global business revolution has resulted in an unprecedented degree of industrial concentration. Giant firms from high income countries with leading technologies and brands have greatly increased their investments in developing countries, with China at the forefront. Multinational companies account for over two-thirds of China's high technology output and over ninety percent of its high technology exports. Global firms are deep inside the Chinese business system and are pressing China hard to be permitted to increase their presence without restraints.
By contrast, Chinese firms have a negligible presence in the high-income countries - in other words, we are ‘inside them' but they are not yet ‘inside us'. China's 70-odd ‘national champion' firms are protected by the government through state ownership and other support measures. They are in industries such as banking, metals, mining, oil, power, construction, transport, and telecommunications, which tend to make use of high technology products rather than produce these products themselves. Their growth has been based on the rapidly growing home market. China has been unsuccessful so far in its efforts to nurture a group of globally competitive firms with leading global technologies and brands. Whether it will be successful in the future is an open question.
This balanced analysis replaces rhetoric with evidence and argument. It provides a much-needed perspective on current debates about China's growing power and it will contribute to a constructive dialogue between China and the West.
reaches o f the suppl y chain. There is intense pressure to la vier cOStS and prices . There is intense pressure to achieve techni ca l progress in order to make packaging lighter, to improve its appear ance , and to make it safer and marc recyclabl e, easier to handle, and betrer able to keep the product in good conditio n. There is inten se pressnre also to establish networks o f global plants close to rhe bottling planrs in order to minimize tranSport and invento ry cOStS thro ugh
y parts oJ th e su ppl y chain use high techn o logies and require high levels of spend ing on R&D in order to meet th e intense dem a nds from the be ve rage companies. Over 200 billion beverage can s are consum ed annu ally. Since the late 1980s, the world's m eraJ CaJ1 industry has rapidly consolidated . Three firm s now srand our as tJ1e global indu stry .leaders, with a co mbined market share of 57 per cent. III 2007, the world's leading ca ll maker, Rexam, pro du ced around 58 billion metal
ject, which pro du ces 2 50,000 boelc!. Jil 20 11 , Ru ssia 's Ro sn efr ag reed that Exxo nMo bil w o uld be its pann er in thc d evelo pment o f its vast potcntial Arctic oilfields, whi ch will in volve a total in vestm ent o f ' hundreds o f billion s of d o llars' . The \X' cstcrn o iJ maj o rs arc the lead operator in aLmost all th e supcr~larg L" projects i_n the world oil indu s ~ try that are o utsid e th e terrirori es o f t.he leadin g N OC co mpanies. Fo r ex ample, th e massive G orgo
nting ), it is eager to fin d something (a nyt hing! ) to in vest in besides US Treasury debt. In 2008, China's investments abroa d doubled fr om $25 bi llion to $50 billion. China has o nly begun. And it won 't stop anytim e soon . Writing III 2011, the chief economist of Standard Chartered Bank, Gerard Lyons, pithil y summed up the current Western sentiment towards China's IIlternational business ex pansion as follows: 'The three most important words in the past decade were not the "War on
Asian economies, it has acclllTIulated large foreign exchange reserves, which it is widely believed to be using to buy the world. However, in per capita terms China 's foreign exchange reserves are far below those of most of its neighbours, and it cannot simply USe its fo reign exchange reServeS to buy the world. The primary function in accumulating large foreign exchange reserves was to protect the co un try from the risk of a global financial disaster - which erupted exactl y as it had lo ng