By 2009 China will become the world's largest exporter, passing the United States, currently in second place, within the next two years and then overtaking Germany to take the top spot.
And it will continue to grow, says Jeffrey Rosensweig, director of the Global Perspective Program at Emory University's Goizueta Business School in Atlanta.
Rosensweig was a featured speaker at the recent National Cotton Council's annual meeting in Austin, Texas.
He discussed the global economy at the NCC general session and touched on population growth, industrialization of key developing countries, and the role currency manipulation plays in international trade.
He said China has made a “huge jump” in a relatively short time to become a major export power. “They are not slowing down,” he said.
He said concerns that China's communist government would interfere in the current business-friendly environment might not pan out.
“More students from China than from any other country are now educated in the United States,” he said. “That will have an effect on government.” He says students see how American democracy works and take ideas back to China.
He also said history may be a factor. “China has been a trading country for more than 5,000 years. I hope communism is an aberration of China's 5,000-year history.”
The growing economy suggests change. China's economy has grown at a 10 percent annual clip since 1979, the fastest growing country in the world. India is second.
“The two fastest growing economies also have the largest populations,” Rosensweig said. Large populations encourage economic growth. “All emerging markets are growing and none are in crisis,” he said. “Every major economy and every major emerging market has enjoyed growth for the past three years.”
Energy accounts for much of the gain.
The United States, however, continues to struggle with a huge trade deficit, one that has been around for the past 30 years. “The trade deficit is at an all-time high,” he said, “but we may have seen the worst of it.”
He expects oil prices to level off at around $60 a barrel. “We still see demand (fueled by growing economies) so energy prices will not go down far. Oil is one of the reasons for increased U.S. imports. But our exports are likely to increase because the dollar is down, making us more price competitive.”
He said the stock market has hit an all-time high so people “feel richer. That increases demand for imported goods. The lower dollar and economic growth in most of the world means improved export opportunity.”
He said the euro is up against the dollar, as is the Canadian dollar. But some trading partners continue to manipulate currency to stay competitive.
“Not all Asian nations are keeping currencies flat,” Rosensweig said. But quite a few are. “China has held its currency flat, so the administration has pressured China to bring currency more in line with the free market economy. China's currency has risen some. “India's currency has risen but not much. Government interference keeps currency low. They are afraid of competition.”
He said Japan also keeps its currency low against the dollar. “Mexico's currency was already low and went down further. It's been relatively flat since 2004.”
Rosensweig said Mexico finds it hard to compete with China's low wages, productivity, infrastructure and technology.
He said China buys U.S. dollars to prop up the value and to keep its own currency competitive. “We have seen some movement but it's hard to know if it will be enough to bring their wages in line. It takes time.”
World population also affects the global economy, Rosensweig said. Populations are shrinking in Russia and Japan, “but the world adds 100 people every 43 seconds. The world will need more food and fabric. That's especially true with improving economies.”
He said U.S. businesses need to align themselves to take advantage of increased populations and increased demand for food and other products. “Most of the population growth will not occur in developed nations.”
He said China's population growth is restricted. “India will continue to grow and will account for one-fourth the population growth rate. Pakistan, Iran, Iraq and Indonesia also are growing rapidly. “And Africa faces huge population increases, accounting for one-third of world population growth.”
U.S. population growth continues with an average two children per family. Immigration adds to U.S. population.
Rosensweig said China's population, currently at 1.3 billion, will reach 1.5 billion by 2030, with the bulk of the population still at working age. The bulk of the U.S. population is in the Baby Boomer segment.
“The U.S. aging population will mean manufacturing looks elsewhere for workers.”
For now, that may be China and then possibly Viet Nam as China's population ages.
India's population, currently at 1.129 billion, will reach 1.532 billion by 2030.
He said an improving economy in emerging markets, added to growing populations, bodes well for business. “U.S. cotton needs growth in the rest of the world,” he said. “The world adds 75 million people every year. You need to put them in cotton.”
Rosensweig said interest rates in the United States have leveled off and may “back down a little by the end of the year.”
He also commented on which countries make the most reliable trading partners and displayed a list of “least corrupt countries.”
Finland, Iceland and New Zealand all come in at No. 1. Haiti takes the spot as the planet's most corrupt nation, at number 163. The United States “is not perfect,” Rosensweig said, and ranks 20th.
China is much farther down the list at 70, along with Brazil, Mexico and India. Russia is 121 and Indonesia is 130.
He said problems come after industrialization for most countries. “Pollution follows industrialization,” he said.
He said China's 10 percent annual growth rate would come with significant pollution problems.
He also said improved economics may affect governments. “After people are able to feed their kids, they want democracy,” he said.