Manufacturing is too concentrated in China
It looks like Brazil is gaining an expertise of creating new rhetoric. According to a BBC report, Brazil's Finance minister Guido Mantega stepped up its warning on currency manipulation, saying, "This is a currency war which is turning into a trade war." Mantega went further to express a jittering voice against China's currency, yuan, adding that "China's 'undervalued currency' was also distorting world trade."
As my last post shows, Brazil's concern would be justifiable given the rapid appreciation of its currency, real. In the last two years, real has risen more than 30% in real terms, one of the biggest gains of all. Brazil's exports are only 13% of GDP, but it could still put a considerable pressure on exporters. On the other hand, yuan lost 4.5% of its value despite a double-digit growth of China's economy which has led the country to the world's largest exporter. Who could say that Brazil is overreacting?
China surpassed Germany as the world's largest exporter in 2009, which undervalued yuan probably had huge effects. Then, what is China exporting? Of course, it should be manufactured products. China is making a gigantic effort to be the world's factory, and estimated to replace the US as the world's largest manufacturer in as early as 2010. China's manufacturing claimed mere 1% among the world's total in 1970, one-twenty-fifth of the US. But now it's more than 17%, and close to the US's 20%. This is an amazing concentration of industrial power given not only developed economies but also emerging countries like Brazil and Russia are transforming themselves to service economies.
An important question should then arise: What if China goes bust? China is going to be the world's factory, but what would happen if the world's factory loses its motion and stops producing? It seems that the world has recently forgotten or is afraid to ask about the demise of China's economy, but the risk remains as to the excessive concentration of manufacturing on one country.
As my last post shows, Brazil's concern would be justifiable given the rapid appreciation of its currency, real. In the last two years, real has risen more than 30% in real terms, one of the biggest gains of all. Brazil's exports are only 13% of GDP, but it could still put a considerable pressure on exporters. On the other hand, yuan lost 4.5% of its value despite a double-digit growth of China's economy which has led the country to the world's largest exporter. Who could say that Brazil is overreacting?
China surpassed Germany as the world's largest exporter in 2009, which undervalued yuan probably had huge effects. Then, what is China exporting? Of course, it should be manufactured products. China is making a gigantic effort to be the world's factory, and estimated to replace the US as the world's largest manufacturer in as early as 2010. China's manufacturing claimed mere 1% among the world's total in 1970, one-twenty-fifth of the US. But now it's more than 17%, and close to the US's 20%. This is an amazing concentration of industrial power given not only developed economies but also emerging countries like Brazil and Russia are transforming themselves to service economies.
An important question should then arise: What if China goes bust? China is going to be the world's factory, but what would happen if the world's factory loses its motion and stops producing? It seems that the world has recently forgotten or is afraid to ask about the demise of China's economy, but the risk remains as to the excessive concentration of manufacturing on one country.
posted by Akihiro Gotoda at
3:55 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home