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What the End of Cheap China Means for the Rest of the World

November 14, 2012 • GLOBAL ECONOMY, China

By Shaun Rein

As a new superpower, China will likely provide a helping hand whenever possible by taking a greater role in international organizations like the International Monetary Fund and the United Nations, but it will be a very different superpower than the United States has been. Unlike America, it is doubtful that China will try to save the global economy or become the world’s policeman. Instead, it will let other nations spend money doing these costly and painstaking things, while they seek out the business opportunities that these actions might produce.

Aside from a culture and ideology that is more focused on internal issues, instead of possessing a missionary-like zeal to convert others to how China thinks, the government is still fearful of internal instability, and will therefore spend most of its time on improving local issues. Moreover, because of strict regulations constraining party officials, government leaders will most likely continue to push their offspring to enter private enterprise to make their money. Most decision-making will provide opportunities for well-connected individuals to leverage their relationships to better seize business opportunities.

China’s foreign policy will be an offshoot—in many ways, an afterthought—of how it deals with internal issues of stability, and the creation of wealth opportunities for the embedded elite, rather than a cohesive policy designed to shape the rest of the world to emulate China’s ideal form of government.

China’s laser-like focus on economic growth, and its greater adherence to free trade and capitalism than America’s, means China can provide a growth engine for many industries, from agricultural products and medical devices to the luxury sector, among many others. Companies that follow the path of Yum! Brands, Procter & Gamble, or General Electric by looking to China as their next major growth engine, will join in the new Darwinian struggle; either they will evolve and become global winners for the next 50 years, or else they will go extinct.

 
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