"Here begins our tale. The empire, long divided, must unite; long united, must divide. -- Moss Roberts (translator) <Romance of Three Kingdoms>"
Last Wednesday (Oct. 7, 2009), Alcoa surprised Wall Street by reporting a profit for the most recent quarter after three consecutive quarterly losses. CEO Kleinfeld said, "China clearly is back and back very, very strong and pulling some of the Asian markets."
This is just one of many examples showing how "China" is positioned in this worldwide financial meltdown and recession. While some blamed China as the cause of this crisis for its currency policy and cheap goods, others hope China will be the very engine that pulls the world, especially epicenter of the crisis, the United States, out of recession.
Zachary Karabell, an American author, historian, money manager and economist, is the President of River Twice Research, where he analyzes economic and political trends. With several 4-5 star books at hand, Karabell wrote a new book to tell us the story behind China's rising economy and its "superfusion" with the United States.
First, the book started with the economical background in China and Unite States. China was poor after decades of command economy and isolation. Deng Xiaoping was determined to open China to foreign investment. United States was at the dawn "New Economy" and big companies were lagging and searching for opportunities around the globe.
Then, the author moved on with stories of three big names (KFC, AVON, FedEx). They invested in China heavily without much short-term return but aimed for the future. In the meanwhile, China utilized foreign capital for development while it still kept financial system partially isolated.
At the turn of new millennium, China's economy started to rocket accompanied by huge return for foreign investment, rising Chinese influence, interdependence between China and United States and tension with the western public, especially what happened along with the Olympics last summer.
After citing several key economical data and political events, Karabell concludes that China and Untied States have become "Chimerica" with closer and closer economical tie between each other despite increasing tension between the nationalities. And the prosperity of the world economy also depends on this "superfusion".
As a reader who grew up in China for 20 years then moved to USA for graduate school 4 years ago, I am immersed in the author's knowledge behind geopolitical public opinions and his subjective view on controversial political ideology on either side. To name a few, I nodded when he talked about the diplomatic dictatorship of USA over other countries including China. I smiled when he mentioned the increasing nationalism among Chinese against the West. I enjoyed his many stories behind major economical/political events happened in either country, such as Tiananmen Square, WTO talk, the Bra War, 2008 Olympics, etc.
I noticed one point on which the author might be wrong. In Chapter 10 (P. 201-2), the author states that "One of the failings of domestic Chinese banks was that they were not attractive for individual deposits." However, AFAIK, the fact is the opposite. Lacking a profound social security system, as well as medical insurance, or unemployment protection, Chinese people have to save a "LOT" in case of any major thing happens. In 2002, National Savings Deposit Balance is 10 trillion Yuan (USD$1.2T), which equals GDP of China in that year. In 2008, the number is CNY21.8T (USD$3.2T). People dare not spend their savings. Thus, the problem is not lack of deposit, it is "Too much deposits". This also suggests a great potential for domestic consuming once extensive social security system assure everyone in China.
About economical superfusion of the world, the author predicted that Chinese manufacturing as well as consuming will be the key to world-wide prosperity. It will also result in a shift of power from the West to the East. A lot of other economists and specialists also predicted this for various reasons. But their views on the fate of USA vary. I agree with Karabell that this shift would not necessarily mean a bad/downturn future for Americans. Actually, they will benefit from this global superfusion and remain prosperous. For further reading, I recommend a book "The Future for Investors". Dr. Siegel discussed this issue from an investor's point of view.
Overall, this is a very good book for understanding the geopolitical and economical interactions between China and United States during the recent decades. It also sheds light upon current world economy issues from a unique angle. I recommend you read this book if you are interested in international affairs, world economy, and/or Sino-US relationship.
In the end, let's go back to the quote in the beginning taken from "Romance of Three Kingdoms". Our world has been long divided ever since; maybe it's time to be united, without conquering. For computing, AMD says, The Future is Fusion; for humanity, Karabell suggests, The Future is "Superfusion". Time will tell...