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Tag Archives: Chinese Middle Class

Recent stories in the Western press describe impending doom for Chinese manufacturing, relating the Chinese demise to Japan in the 1990’s.  But to real China-watchers and experts, this is a naïve view.  It assumes that the Chinese government will sit back and do nothing to correct the trends and that the Chinese economy will stagnate.

While Chinese manufacturing is not known for innovation, it really is just a matter of time.  With 700,000 graduating engineers per year, China is quickly becoming the world’s powerhouse in manufacturing engineering and in continuous improvement.  The next phase is innovation and optimization. 

To address innovation, the Chinese government advocates student exchange programs and invites thousands of visiting US professors into its universities to infuse creativity into the education systems. Over time, this will reignite the creative innovation spark that the Chinese displayed over thousands of years, inventing printing, gun powder, deep water bridges, massive sailing ships and irrigation to name a few.  While US politicians tell us not to worry because China cannot innovate, the Chinese are busy proving them wrong.

To address optimization, China has started on the journey to automation.  Automation and the adoption of software systems will dramatically increase productivity at the factory level and will drive continuous improvement and optimization.  Although this is a long road to travel, it is nonetheless the road Chinese manufacturers are on.

It’s time to wake up and smell the green tea.

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I’ve been watching and listening to the events and chatter about Hu Jintao’s visit to the US.  There is certainly a striking difference between the way China and the US are acting now that Obama is President and Clinton is Secretary of State.  While there are still many issues to be resolved, there appears to be mutual respect between the leaders.  This makes me hopeful.

President and Mrs. Obama even hosted a rare State Dinner for Hu.  President Bush just had a working lunch.  This is a significant difference in the respect given to US-Chinese relations.  It’s about time America took its head out of the sand and fully acknowledged the second largest economy and fastest rising super power in the world.

The economics of  the two countries tell the story of why it is so important to have a good working relationship.  The US GDP is $14.6 trillion.  The Chinese GDP is $5.7 trillion and rising at double digit rates.  But if you compare PPP (Purchasing Power Parity) or PPC (Purchasing Power Correction), a comparison of consumer buying power in each country, China’s economy is already larger than the US.  And it will continue to grow.  In the next few years, China’s middle class will be 700 million people;  more than double the population of the entire US.  Not only will this be the largest consumer market in the world, it will become the greatest target market ever for US goods and services.

Of course we all understand that China is still working on things like human rights and democracy.  But there is no stopping the warp-speed economic development inside China.