United States of America which had bi-lateral trade to trillion worth of Dollars is slowly on the ebb. These goods are no more seen on the shelves of the biggest and largest retail malls. China can fret and fume as its exports to United States dipped by 20.5% to US$957.36 billion. The prime reason for such a decline was the falling Dollar. . More the dollar falls, the more costly the export becomes. Trade value between China and the country’s three major trade partners, the EU, the U.S. and Japan, was US$292.42 billion, US$239.36 billion, and US$182.34 billion during the first ten months of 2009, which averaged a drop in growth of 18.7%, 14.9% and 19.3%.
Did not this do a bit of good to the United States as it gained a lot due to compressed imports from other Countries?
Will it not pave the wave for higher consumer consumption? When exports of choked, the production from inland market is expected to rise. The demand will chase the supply. The consumer index which showed much improvement in the first ten months of 2009 proves this point.
The US domestic sector has been given a boost and it has acquired space to their own local producers to manufacture the goods and supply to their own people which has resulted in lesser imports.
So long as the Dollar remains weak, the Asian countries and China which has made a deep dent into American markets at a quick pace will tarry. They will stop exporting to the United States, and this will result in a commercial boom for the local industry which would be able to capture the markets vacated by these aggressive players, as a weak dollar would not be an advantage for these countries to continue with exporting their goods. At the same time US GDP growth is pegging up as more domestic products will be consumed and this would naturally diminish exports. .
One would be tempted to ask, Is America deliberately trying to downsize the Dollar, so that American economy which is in the doldrums will recover, there will be free float of money, the loss of employment can be prevented drastically. By artificially keeping the Dollar value low, US will encounter fiscal deficit if Dollar gets downsized.
The ambitious China is to go for mass production, GDP had an average growth rate of 10.5%.The economy is also getting back on its feat of maintaining the average rate. In the comings days china will face one of the hard times to push its products in other economies. China is running beyond 100% productivity which will result to cheap prices and lower profitability for the goods of Chinese origin. When as and when Dollar depreciates and stays at such a level, China will find it hard to find space to dispose off their products; this will result in their looking at new markets, nascent markets, and emerging markets .When this happens, the domestic industry in these places will suffer severe heat from Chinese imports and they may have to slap anti dumping duties. This would result in countries which look for replacement of American markets at short to medium level facing anti dumping charges and naturally, they will have to knock at the door of WTO. The over capacity bubble will put brakes on the revival path of Recession which will reverberate across the countries and continents and will devastate the economies of these countries who have excessive dependence on exports especially to America. Asian economies will have to cut back on many things from manufacturing to industry growths. Moreover new economies need to be developed so that the loss from trade to US market is compensated by the growth in exports to emerging, nascent and new markets. Otherwise Asian economies will have severe structural problems in trade, export, employment, economy, Foreign Exchange, etc.
China has taken serious cognizance of the situation and in the recent past has increased its industrial investments to record levels. Chinese fixed asset investment was 15.07 trillion Yuan ($ 2.21 trillion). This investment have resulted to increased productivity beyond 100% and antidumping their goods to other economies. Chinese investment in the Agricultural sector especially the primary sector covering farming, fishing and forestry jumped 54.1% year on year. The industrial sector, or the secondary sector, posted a 26.8% growth in investment and the tertiary industry, including commerce, finance and services saw investment up 37.8%. This shows that not only Government stimulus resulted in China’s higher growth even in the worst of Recession times, but steady investment has resulted in higher growth. Industrial production has not decelerated but has progressed with a higher percentage.
If China needs to find new vendors across the globe to convert their manufactured products to money, they need to depend on other economies. The Chinese government conscious of the dangers of the external markets, have taken caution to stabilize their internal manufacturing set up by going in for A & M and restructuring the steel sector to create three globally competitive steel making giants who can withstand the global cartels. They have also taken care to stick to the environmental concerns, reduce energy consumptions, putting the end products to standards and quality, optimum but careful use of resources and carefully watching the production scale. Another industry which they plan to merge through M&A is the Automobile industry. Two conglomerate Chinese automakers with an annual production of 2 million vehicles will be planned from dozens of small domestic car manufacturers to bring and strengthen global competitiveness.
It is a fact of economic history that when the United States car makers are struggling with their financial sheets, China made a remarkable feat by getting their Car sales soaring by 72% from the same period of last year when 1.2 million vehicles were sold.
The mergers and acquisition deals in China grew from $ 1.3 billion in the first quarter of 2009-10 to US $ 8.9 billion in the thirds quarter. The increase in economy of scale, expansion and growth of their business size will give these giants competitive strength and power to go in for overseas expansion. China’s planning is meticulous, it has got wind of the changed times, it is aware of quality, price and competitiveness will play an improved role in the new world. Chinese steel and auto exports will remain a threat to the American steel and auto companies, as the meticulous precision with which China has expanded the capacities of all the steel/automotive companies so that they can venture into the international arena with full fledged strategy, planning and execution.
Our Indian Comrades, who are opposing the integration of Banks into three or four strong banks through mergers and acquisitions, should take a leaf out of the Chinese comrades instead of saying what is good for china is not good for India. When will one learn?
Indian Government, Indian organizations, Indian institutions dealing with commerce and exports should plan, strategize, with meticulous scheduling , the way export route must be executed instead of wailing that give us stimulus otherwise we will perish, give us support like China etc. We need to stand on our own legs. We need to plan for the future. We must have a Disaster Plan Management on our hand or an alternate strategy. . Neither our Exporter giants nor the Commerce Ministry has any inkling as to how to conquer the problems, how to exploit the Strengths, how to overcome the weaknesses, how to use the advantages of opportunities and how to face the threats. Better late than never. Awake and arise Commerce Ministry!
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