BOOK REVIEW: Chinamerica – why the future of America is China, by Handel Jones; McGraw Hill; €23.99

AS THE sun goes down in the United States, the day starts in China. For Handel Jones, a business consultant with over 30 years’ experience of the Chinese market, it’s an apt metaphor. How long the sun shines in China and how long the US will remain in twilight depends not only on China but on the actions of the US, he says, setting the tone of this well-researched and engaging book.

Written from a US perspective, Jones paints a depressing picture for America of the growing imbalance between the two world powers. The US is characterised as an economy addicted to deficits as a means to stimulate growth. Its traditional industries such as cars and steel are in decline, its trade imbalance is worrying, productivity is poor and an entitlement mentality prevails among its middle and upper classes, many of whom have burdened themselves with excess debt.

The Chinese, by contrast, realise that wealth is created by the amount of goods produced and sold to others, and have accumulated a substantial amount of the world’s wealth in the process. By September 2009, the Chinese government held foreign exchange reserves of $2.3 trillion, compared to just $83 billion for the US.

As its GDP increases dramatically, China’s growing middle class is also helping to boost domestic consumption but at a much more temperate rate than in the US. Consumption as a share of GDP is actually in decline in China, down from about 50 per cent 20 years ago to 35 per cent today. In the US the corresponding figure is now twice as large.

China has been built through a mix of self-sacrifice, patriotism and central control. There has been huge migration from rural areas to feed the establishment of mega-industrial cities. Shenzhen, for example, has grown from four million to 19 million in 10 years and is characterised as a gigantic hive of transient labour, with transport geared to getting workers from their barracks to job sites. While its skyline and those of cities such as Shanghai and Guangzhou showcase modern high-rise buildings, there are sections of these cities where 10 or more people live in a room.

Government remains strongly in control of all aspects of life but tensions bubble below the surface. Living standards in rural China are poor, with abject poverty in many regions. At the other end of the social scale, China’s growing entrepreneurial class is resentful of state control and high taxation.

Moreover, the commonly held perception of the Chinese is that they are conformists and are willing to work in cohesive environments but this is merely a facade, the author says, and the reality is that they are highly individualistic and driven to succeed. China’s government will need to harness that individualistic, entrepreneurial character of the Chinese if it is going to continue to succeed in building large enterprises that are disciplined and capable of competing in global marketplaces.

China will also have to address the environmental consequences of its rapid industrial expansion.

For the next stage of its development, Jones believes that China’s emerging relationship with Taiwan is of huge importance.

An alliance with the Taiwanese, world-class producers in areas such as semi-conductors and consumer electronics, could provide China with a massive technological boost, while China offers Taiwan the chance to duplicate the island nation’s success on a vastly bigger scale.

Although the risk is that China merely robs Taiwan of its intellectual property, he concludes that the most likely scenario is a win/win where some Taiwanese intellectual property is absorbed by the Chinese but Taiwan will get to sell a huge number of additional goods to China. The losers, in this scenario, will be the US, Europe and Japan.

Nonetheless, to sustain its large export industry China needs its major trading partners such as Japan, Taiwan, Korea and the US to remain large consumers.

Politics plays a big part in China’s relationship with America, and Chinese leaders view the commercial competition between the two countries as a political as well as economic battle. China’s growth, and especially the growth of its middle classes, represents a huge potential opportunity. Whether the Chinese government can continue to enforce protectionism is open to question.

As Jones observes American business people and political leaders need to understand the dualism of the Chinese perspective towards the US. If the US acts with consideration and finesse, the Chinese market can be an open and lucrative business opportunity.