[TheForge] new book review

[Schade]

Hope you like Chinese.

Bob
__________

  CHINA INC.
  How the Rise of the Next Superpower Challenges America and the World
  By Ted C. Fishman
  342 pages. Scribner. $26.

  If the 20th was the American century, then the 21st belongs to China. 
It's that simple, Ted C. Fishman says, and anyone who doubts it should 
take his whirlwind tour of the world's fastest-developing economy.

  The numbers are staggering. From 1982 through 2002, the United States 
economy grew at an annual rate of 3.3 percent, he writes, well above 
average for the world's most prosperous nations. China's economy grew 
at an annual rate of 9.5 percent, meaning it "doubled nearly three 
times over," in the generation since market reforms were introduced. In 
2003 it bought 7 percent of the world's oil, a quarter of its aluminum 
and steel, almost a third of its iron ore and coal, and 40 percent of 
its cement. It makes 40 percent of all furniture sold in the United 
States. Its 3,000 Christmas-decoration factories exported more than 
$900 million tree trimmings and plastic Santas in the first 10 months 
of 2003.

"China still only makes one-twentieth of everything produced in the 
world, but on the world stage it plays the role of a new factory in an 
old industrial town," Mr. Fishman says. "It can spend, it can bully, it 
can hire and dictate wages, it can throw old-line competitors out of 
work. It changes the way everyone does business."

  One of the most powerful weapons in China's economic arsenal is what 
businesses have come to know as "the China price." A stampede from the 
countryside to China's new industrial boomtowns has created a vast 
low-wage army, working for an average of 40 cents an hour, that can 
turn out consumer goods of every description even cheaper than Mexican 
or Malaysian factories can. American factories that cannot deliver to 
Wal-Mart or General Motors at the China price often face two stark 
choices: they can go under or set up shop in China.

Many choose option No. 2. But danger lies in that direction too. The 
Chinese are adept at copying and quite loose in their interpretation of 
intellectual property rights. One of Mr. Fishman's more striking 
examples is the auto industry, which looms large in China's economic 
plans. American and Japanese companies spend $1 billion to $2 billion 
to develop a new car. The Chinese, by forcing foreign car companies to 
form joint ventures with their companies and to share their technology 
in order to enter China, hope to leapfrog over those kinds of 
development costs.

  Foreign companies, salivating at the thought of 100 million Chinese 
customers, cannot stop themselves from signing on the dotted line. 
Sometimes, rude surprises await. At the 2003 Shanghai auto show, G.M. 
executives unveiled a new $9,000 small family van, only to discover an 
identical vehicle, priced at $6,000, at a Chinese booth in the same 
row. The clone was made by Chery, a Chinese company owned in part by 
Shanghai Auto, G.M.'s joint-venture partner.

  Americans who fret over Japanese-style assaults on major industries 
miss the point, Mr. Fishman maintains. The real competition, he argues, 
and the real source of China's strength, lie in local enterprises "that 
spring on the scene lean and mean, planned and financed by investors 
who want to make money quickly." No one in Beijing analyzed the German 
toy industry and decided that China needed to move in.

  Mr. Fishman describes China's miracle economy with a mixture of fear 
and admiration. He is a lively writer, and some of his most vivid pages 
are devoted to the wrenching transformations brought about by the 
government's controlled experiment in free enterprise. He paints a 
neon-lit portrait of Shanghai, the showcase city of the new China. He 
also walks through the market stalls and factory floors of new 
super-cities like Shenzhen, a fishing town of 70,000 20 years ago that 
now has 7 million people, making it larger than Los Angeles or Paris, 
swelled by migrants from the countryside looking for a better life in 
the city. They are part of the largest human migration in history, a 
tide estimated to be as high as 300 million Chinese who account for the 
dynamism of the Chinese economy.

Their wishes, increasingly, will be our commands, Mr. Fishman says. 
Their production and consumption patterns are already changing the way 
Americans shop, the kinds of jobs, wages and pensions they can expect 
and even the air they breathe. The Asian Brown Cloud, a wind-borne 
industrial smog that originates on China's east coast, can be seen in 
California as it rides the jet stream. (China has 7 of the world's 10 
most polluted cities.)

  Mr. Fishman does not really have any convincing ideas on how to meet 
the Chinese challenge. The book goes a bit soft at the end, as he 
recommends better education to deal with the narrowing research and 
development gap between China and the United States. He would like to 
see Washington pay as much attention to China as to the Middle East. 
But he's a much better worrier than he is a problem solver. If it's any 
consolation, China is beating just about everybody in the world right 
now. How can you stop a nation where peasants figure out a way to sell 
on eBay? It's simple, Mr. Fishman seems to be saying. You can't.