CHINAMERICA

           :CHINAMERICA

The Uneasy Partnership that Will Change the World

McGraw-Hill
2010
ISBN: 0071742425




________________

HANDEL JONES















1. ABOUT THE AUTHOR
:Handel Jones is the founder, owner, and CEO of International Business Strategies, Inc., a market and strategy consulting and analysis company whose client list includes IBM, Nokia, Samsung, Sony, Toshiba, TSMC, and China Resources. He has been involved with Chinese governments and state-owned and private businesses for more than 30 years, and he is one of the leading experts in directing international business investment in China and Chinese corporate investment/expansion overseas. He lives in Los Gatos, California.
2. The growth of China is clear, imposing, and seemingly inevitable. Meanwhile, the United States is operating with large deficits and a perceived and real loss of its global leadership role. What does this mean for the future of America and China and the generations of citizens of both as yet unborn?
ChinAmerica provides great clarity of the characteristics of the Chinese people and their ambitions for themselves and their nation. If any sense is to be made of the future relationship between the two countries an understanding of the evolving trade and competitive dynamics between them is essential and this ChinAmerica delivers .
Conventional wisdom pits China against the U.S. in a war for economic supremacy. However, , Handel Jones, a pioneer in creating Sino-American business partnerships, and one of the leading experts on China's industrial and economic emergence, demonstrates that the wave of the future is cooperation between the two titans, not conflict-and how America will benefit from increased economic engagement and competition with China.

3. Handel Jones opens the first Chapter - The FRONTLINES OF the CHINAMERICAN WEALTH BATTLE of his book with the narration :

"As the Sun goes down in the United States, the day starts in China.Figuratively speaking, the financial sun has been rising in China for several years, and it is starting to set on the United States. How long the sun shines on China, and how long the United States will remain in twilight, depends not only on China but also on the actions of the United States. "

To some, conflict between China and the United States appears to be both imminent and unavoidable (indeed, in some eyes, the battle has already begun). But this perspective badly overlooks one vital fact: both nations have no choice other than to act in their mutual interest. Focusing on several key areas of conflict and mutual interest, Jones gives a thorough and eye-opening portrait of the policies, history, and habits that have led to the intersecting fortunes of the two superpowers.
4. In the Introduction to the book ,he opens with the question:
"China is threatening to usurp the position of the United States as the global leader in wealth. Will the United States remain wealthy and strong, or will the United States be financially weakened by China?."
He then goes on to explain, as to" how his book analyzes why the United States is in a downward financial spiral while China is in an upward financial spiral, one that will decimate the U.S. economy and lifestyle if changes aren’t made. Then he elaborates the methods he used to study at depth about China and observes "
"With deeper exposure into the country and greater familiarity with its middle class and its leaders, it became clear to me that China is on a mission.There is strong top-level leadership to guide the economy. It is clear that senior leaders view their people as assets to be used or discarded. The people of China are viewed by their leaders as a river that flows into the sea. If the water is not used as it passes by, its value will be lost."
5. Then he summarizes his views about China and United States :
"China is not likely to threaten the United States militarily, but China is in direct competition with the United States for global wealth. China is a friend to a strong United States, but China is a threat to a weak United States. It is up to us in the United States to control our destiny. Time is, however, the enemy because the longer we wait, the deeper is the hole that we are digging for ourselves".
6 ) Tracing the major global events in the economic sphere affecting all countries over a long period, dating back to World War II, he observes,:

Indeed, CEOs have replaced generals as the leaders of conquering armies. It doesn’t matter if one views this as a good thing or a bad thing—it is a fact of life in the twenty-first century. Global competitiveness at the corporate level is the way to win the international battle for wealth.

" China is closing the gap with America in terms of gross domestic product (a key measure of economic output). and forecasters such as Pricewaterhouse Coopers and others agree that it will occur and that it is only a matter of a few decades. It is painful and bewildering for the American Colossus, which almost single-handedly rebuilt Western society after the devastation of World WarII, to face the reality that it will lose economic supremacy. "
Essentially, the United States is in the same position that Europe was in after World War II—watching another car roar past it on the economic highway. "
7 ) Dealing with the Battle for Wealth between China and United States he adds :
In fact, a substantial amount of the world’s wealth has moved to China. As of September 2009, the Chinese government held foreign exchange reserves of almost $2.3 trillion, roughly a quarter of the foreign currency reserves of the entire world. According to the reserve rankings by the International Monetary Fund, it is more than the combined foreign exchange holdings of Japan, Russia, and the entire European community'.
.He goes on to add:.
:"Contrast that approach to building wealth with the behavior of the majority of the U.S. population in the twenty-first century. An entitlement mentality prevails among most of the middle- and upper-class populations. If people have been wealthy for a long time, they develop an attitude of entitlement—they indulge in a high standard of living without worrying about the consequences of living beyond their means. Instead of building personal and national wealth, many Americans are focused only on consuming, and they are hampering the rest of the country’s population’s quest for a better life.Politicians have manipulated tax and spending policies to such an extent that it has affected Americans’ relationship with their country.In less than 50 years, we have reversed John F.Kennedy’s call in 1960 to “ask not what your country can do for you—ask what you can do for your country."
8 )He chronicles certain weaknesses in US economy as responsible for its declining strength:

a) Politicians use the approach of reallocating taxes to gain votes.
b) Poverty in the United States has become a way of life for 10 to 15 percent
of the population.
c) Government employees receive high compensation and very generous retirement packages. The levels of compensation in many cases are not consistent with their contributions as employees
d) Government regulators have failed to police the banks and other financial institutions that created the 2008 to 2009 recession.While new regulations are being added to reign in the financial services industry, a key ingredient that created the global financial crisis was a lack of enforcement of the existing regulations.
e) Trade unions in a number of industries have taken short-term approaches to compensation.



9) After analysing the relative strengths and weaknesses and the reasons therefor, of US and China in the Industrial sphere covering Automobiles, Electronics, Defence and many other spheres ,he summarises:

"The United States has gone from an environment (30 or 40 years ago) of having dominant corporations in many strategic industries to being the leader in a relatively narrow range of industries. As we have seen, U.S. companies are market leaders in computers, software, semiconductors,air transport, and other areas. Yes, the United States is also strong in data networking and large storage devices, but these markets are small compared to automobiles and consumer electronics. Many critics say it is impossible for manufacturers in developed countries to compete against firms in lower-wage areas.

The United States is characterized by strong entrepreneurs in a number of key areas, but many lack focus on how to utilize their strengths to increase the wealth of the country. Added to the problems Government policies remain an issue. The United States spends tens of billions of dollars each year to build advanced military aircraft,submarines, and other weapons, but it allocates a relative pittance of the federal budget to improving the wireless communications infrastructure in the United States.

In the United States, the reality is that the agricultural industry,which is concentrated in the Midwest, has had more political power than the electronics industries concentrated in California and Massachusetts. The outsourcing of manufacturing to the Far East by U.S. electronics companies was easy to do because labor does not wield the same level of political power in the Far East that it does in the United States.

Referring to the biggest internal threat facing the United States viz:mounting personal and governmental debt he says:
"The U.S. economy continues to be the largest in the world, but it has had low GDP growth over the past decade. In addition, the key driver for GDP growth in the United States in the early years of the twenty first century has been the use of fiscal deficits to stimulate consumer consumption rather than increasing productivity. The United States has become addicted to deficits as a means to generate economic growth. In fact, the new deficits pay for the old deficits. What’s more,the deficits become larger at each refinancing cycle ".

10 ) China's Rise:
China has had excellent success in building a large industrial base, which enables it to export more than 50 percent of its output and also meet a high percentage of its domestic demand. Its companies are proud of their factories and the goods they make. Larger and more efficient factories are being built in China, with its auto industry becoming the largest in the world - in April 2010 alone, it made 1.73 million.
To achieve such an industrial growth, Chinese workers and managers have made huge sacrifices. The more than 200 million migrant workers have given up their family lives, and many get to see their children only during the Chinese lunar new year.
Many Chinese entrepreneurs are very wealthy. CHINA now has the highest number of billionaires after the US. Many of these billionaires are under 40, and in most cases, owe their success to the country's large market and demand. Examples include Baidu, Alibaba, Tencent and other Internet-centric companies.
Though Huawei, Haier, and some other companies have begun experiencing success in the global market too, most of the successful Chinese companies have to thank the domestic market for their success.
The author finds high upward mobility of the young within corporations, in China so different from Japan, where one's level of responsibility is customarily related to one's seniority.
“In Chinese firms, often there is no group of older, experienced managers to serve as mentors for young managers.”
The book mentions examples of successful businesses in China built by young entrepreneurs, such as Tencent (Ma Huateng), Baidu (Robin Li), Focus Media (Jason Jiang), and Alibaba (Jack Ma
A key to the success of these entrepreneurs, as Jones decodes, is that they have applied market technology concepts developed in the US, Japan, and Europe while incorporating features unique to China.
Take, for example, Alibaba, a business-to-business online trading company that connects buyers directly with suppliers, cutting out the brokers and other intermediaries, thus combining Internet technology concepts from outside China with features unique to China.
Not unlike a commercial Amazon.com, Alibaba offers a supply chain networking platform, explains Jones.
“But because credit and debit cards are not as widely used in China, Alibaba has developed a PayPal-like payment technology, called Alipay, that is unique to China in that it is escrow based.”
Another business model that the author finds unique to China is that of Focus Media, which installed flat-panel advertising displays in elevators and other public places.
“The advertising content is changed by people who go from location to location on bicycles to plug in new cards or DVDs
. This way of updating content clearly would not be practical in most Western cities.”




11 )Global competition
On the question whether Chinese companies will be able to compete globally, Jones feels the need to distinguish between the established and the newer companies.
In the former category, he cites the case of China Mobile, China Telecom, and China Unicom, which have done well as wireless carriers in China.
“However, the fact that China Mobile has 500 million subscribers in China does not necessarily mean that the company can compete strongly in markets outside of China.”
In contrast to traditional managers whose careers have not prepared them for the competitive pressures they must cope with to operate effectively in the global market,the newer entrepreneurs of companies such as Tencent and Baidu, Alibaba and Focus Media, hold the promise of China playing successfully on the global stage, the book postulates.
The track record, though, for new Chinese ventures, especially those in high-tech, has not been encouraging, observes Jones.

In a chapter on= Taiwan and its synergy with China, the author states that while the US has been Taiwan's major export destination, China will be biggest customer for its exports during the next several years.
“With their common language, it is very easy for the Taiwanese to communicate with the workers in China. The common language represents a major competitive advantage for the Taiwanese companies compared to Western countries that set up manufacturing facilities in China and have to rely on translators.”

Yet, it is not as if Taiwan would send its ‘crown jewels' – its most advanced liquid crystal display (LCD) and semiconductor wafer fabrication facilities – to China, Jones clarifies.
He informs that a range of restrictions have reduced the ability of Taiwanese companies to provide their most advanced technologies to China. Which is why ‘many of the most capital-intensive facilities, such as those required to make silicon wafers and flat-panel displays, are located in Taiwan,
while the high-volume assembly facilities are located in China.'




The chapter wraps up with two conflicting scenarios, thus:
“China is a high-reward but potentially high-risk market for the Taiwanese corporations.
China offers Taiwan the chance to duplicate the island nation's present success on an absolutely vast scale. Or
China could use the IP (intellectual property) to further expand its own success and rob Taiwan of a huge opportunity.”
The most likely outcome, in Jones' prediction, is a combination of the two, where the ‘synergy' is the advantage to China to advance its own industries using Taiwanese IP
or , even as Taiwan benefits from a large opportunity to sell additional goods to China.

11. What China needs to do to continue prospering, however, is the ability to design new products. It needs original ideas and the brains to design and develop new products and set up SEZs of "brainpower". It has to maintain its efficient manufacturing base, but that should only provide the foundation for a new knowledge-based economy.
The country has to recapture the creativity and innovation so common to its past. The skills that would be needed to build its innovative phase are strategic planning, marketing and innovation. Chinese history is full of examples of clever strategies, many of which helped the country win battles. Today, China needs to devise strategies to win the battles in the global market.

The Chinese took great pride in the success of the Olympics. which demonstrated its ability to stage an exciting world event that was efficiently managed. The extensive coverage of the Olympics inside China combined with China's winning 100 medals was a major inspiration for the population to keep working hard for the country. . The need to motivate the Chinese people will remain acute because they will have to make many sacrifices to promote the growth of the economy.
The challenges facing China are extensive, but China is using top-level planning and control actions and a wide range of growth initiatives to deal with them.
13. The United States and other countries are underestimating the long-term competitive threat from China in a number of business areas. While it is inevitable that China will become stronger and will increase market share in a range of industries, including electronics and automobiles, the implications of these trends can be significant if China also controls the supply of raw materials.
China started with industries that were low technology (such as clothing and shoes). Then it progressed to heavy industries (the initial processing of raw materials). Consider what has happened in the steel and aluminum industries.

China has continued to build its steel and aluminum industries, even though there is excess capacity worldwide. China wants self-sufficiency in these vital products. To try to keep its steel and aluminum factories at or near high capacity, the government provides subsidies so the steel and aluminum companies can charge low prices for exports. This breeds increasing resentment in the United States, Japan and Germany.
Competition from low-priced Chinese imports is crippling U.S., Japanese, and German domestic steel and aluminum companies, in some cases forcing factories to close or putting the companies out of business. In response, protective tariffs on the Chinese goods are being increased, which leads China to quickly impose or increase tariffs on imports from those countries.
The strategies being demonstrated in the steel and aluminum industries are harbingers of those that will be utilized in many industries in China in the future. If this is done systematically, industry by industry, the impact can be large over 10 to 20 years.
When China produced a small percentage of the global output of such goods, its export strategies didn't antagonize many corporations in foreign countries. Now that China is producing a high percentage of global capacity -- for example, approximately 48.8% percent of global capacity for steel in July 2009 -- the impact of the Chinese strategies on competitors in other countries can be devastating. Not surprisingly, the competitors in other countries view China's pricing as predatory. But, like it or not, the alliance of Chinese corporations with the adroit support of their government is helping Chinese exports become increasingly competitive in foreign markets and gain market share.



As we've seen, its latest initiatives are in high technology, including electronics, automobiles, and aircraft. The strategic threats from the high-technology businesses are much more concern-worthy to the United States than the leverage China had from supplying lo-technology merchandise.







China will become a high-technology society that is a formidable competitor in the global market. By having the large local market and competitiveness in manufacturing, the Chinese corporations will be able to gain high market share worldwide.

The large market inside China and the methods used to protect this market will result in more conflict with other countries.

14,) The conflicting motivations between China and the United States are leading to a war over wealth. Indeed, some would say that a war has already begun: there have been several trade sanctions enacted by the U.S. Congress, and there is a growing number of complaints that Chinese companies have been selling goods in the United States at prices that are less than their cost of manufacture. This technique to capture foreign markets is called dumping.
The tariff warnings and dumping complaints reflect what happens when a nation loses economic power—it feels threatened'' .




15) The declining fortunes of the United States and the continued increases in the wealth of China could ultimately destabilize the current political structure of the planet.
To date, the China winds have been relatively weak, compared to what they will be as China continues building its strengths. How severely the China storm will harm the United States and other countries will be determined by many factors
China subsidizes development of more efficient manufacturing techniques, and in response America threatens protectionist barriers. Developments such as these, however, don’t necessarily put the nations on a collision course. To Jones, these facts point to a very real opportunity for Chinese and American governments and businesses to work together rather than be separated by economic tensions
16.) Focusing on several key areas of conflict and mutual interest, Jones gives a thorough and eye-opening portrait of the policies, history, and habits that have led to the intersecting fortunes of the two superpowers. Jones also outlines actions the United States must take to hold on to its leadership role by forging equilibrium with China that's based on mutual respect and dependence.
Filled with cogent analysis and expert advice, ChinAmerica is the most comprehensive look yet at the interdependency of the world's two leading powers. This is a book that will change minds about Sino-American relations.

“Handel Jones lays out concisely what China is doing right and the United States is doing wrong. This is a wake-up call because China today is the most serious economic competitor that the United States has ever faced. This book should be required reading for all U.S. politicians and business leaders.”

17) —
Jones also outlines actions the United States must take to hold on to its leadership role by forging equilibrium with China that's based on mutual respect and dependence. As Jones makes clear, the contrast between the two powers couldn’t be more startling: while China is amassing through trade nearly one-fourth of the world's foreign exchange reserves (nearly three-fourths of that amount in USD), the United States excels mostly as a consumer of finished goods, with Americans unconcerned about debt and other consequences of living beyond their means.
We can thus summarise the book as projecting an optimistic view from a leading global economic analyst, the definitive look at the costs and benefits of U.S. competition with China which,
Demonstrates that the wave of the future is--- cooperation between America and China, --not conflict-
and how American businesses will benefit from increased economic engagement and competition with China & also
"Chinamerica" is a current buzzword in discussions of both globalization and the necessity for the West to "up its game" to compete with China'




 --konthai

References{
1.REVIEW in Business Line

2 do in DAILY TIMEs

3 Article

"Emerging Markets" in The Street