http://www.economicsuk.com/bookblog/ Accompanying blog site for David Smith's latest book. en Copyright 2008 Sat, 01 Dec 2007 00:01:01 +0000 http://www.sixapart.com/movabletype/ http://blogs.law.harvard.edu/tech/rss The emergence of China and India is of fundamental importance to Canada. These two leviathans have produced a step change in the global demand for energy, pushing up price of oil and other commodities, but at the same time added to concerns about climate change. When an ill wind blows pollution across the Pacific from China, Canada is often on the receiving end. Monitoring stations are being set up to gauge the extent of this pollution threat, following an episode in April 2006 when a huge cloud of pollution from China found its way to the North-West of the United States and Western Canada. Can China co-exist in a sustainable way with the rest of the world? What about India, with its weak environmental standards. The energy these countries are hungry for is being burnt, and not in an environmentally-friendly way. China and India’s rise is like that; for every benefit there is a potential cost. Every opportunity brings with it a threat. China and India present a competitive challenge to Canada in both manufacturing and services. The story is a familiar one; low-cost manufacturing in China and highly competitive IR outsourcing and other white-collar services in India. But it is also a developing story. Chinese and Indian companies are emerging as big global players. Technological progress is occurring at a rapid rate. It is not longer possible to comfort ourselves with the idea that the threat these countries offer is mere cheapness. In the United States these threats have produced a political backlash and calls for protectionism yet to be reflected to any serious degree in Canada. But these new economic relationships will need to be carefully handled, particularly in times of economic adversity. There will also be diplomatic challenges. How will the West embrace China and India in their quest for a place at the top table commensurate with their economic clout? Will Canada still be able to claim a place as part of the G8? The challenges are many and varied, as the book will describe, but there are also a range of exciting opportunities. If the world economy is tilting to the east, to Asia, as this book suggests, Canada is well-placed to take advantage of it. Of course, in many respects, Canada has been integated with these economies more than most. There are more than a million Canadians of Chinese descent and more than 900,000 of Indian descent. These days we are talking about more than just the movement of people. There are significant trade and investment flows between both countries and Canada. Early in 2007 Jim Flaherty, the finance minister, described the synergies between China and Canada. ‘China is an economic giant whose reach and influence continue to expand around the globe,’ he said. ‘Canada, on the other hand, is an emerging energy superpower, is a centre of excellence in science and technology, and is a natural gateway to the largest market in the world. The mutual benefits are obvious.’ But there are also tensions. When China launched its “RedBerry” in 2006, the echoes of the BlackBerry, made by Ontario’s Research in Motion, were obvious. The Canadian intelligence services have been investigating economic espionage by Chinese agents. Canada has signed a science and technology agreement with India and is keen to tap into the fast-expanding Indian market, particularly construction, architecture, design, engineering, telecommunications and energy distribution. Canadian businesses will be looking with some enthusiasm to the economic rise of these two huge countries. There is, however, also a sense in which Canada is not making the most of the opportunities China and India’s rise offer. In April 2007 the Canadian Chamber of Commerce set a target of quadrupling trade and investment in India in five years. The backdrop to this, according to Nancy Hughes Anthony, the Chamber’s president and CEO, was one of disappointment. ‘If the Canada-India economic partnership is to grow and prosper, the time for action is now,’ she said. ‘Canadian interests face stiff competition from those who already have a substantive presence there. Many other countries and their companies have a focus on India that greatly exceeds what Canada has done to date. We are falling behind.’ India does not necessarily need Canada, the Chamber said, there being no shortage of partners and investors anxious to get a piece of the action. But Canada, it said, does need India. While the trade relationship with the United States will remain the key one for Canada for the foreseeable future, Asia’s rise is an opportunity that cannot be spurned. Similar concerns apply to China. Here the target is more modest, to double trade and investment by 2010, but there are concerns it will not be met. You need sharp elbows and good contacts to succeed in the highly competitive Chinese market. Some will, but many will not. Even so, China is already Canada’s second largest trading partner, after the United States. The rise of China is a big, spectacular change that comes along only once in our lifetimes. Many in Canada will be looking at it with some trepidation.This book, I hope, will succeed in putting these hopes and fears into context. http://www.economicsuk.com/bookblog/2007/12/a_preface_to_the_canadianameri.html http://www.economicsuk.com/bookblog/2007/12/a_preface_to_the_canadianameri.html Sat, 01 Dec 2007 00:01:01 +0000 This is a piece from The Sunday Times based on the book. Two or three years ago I was talking to some business people when the conversation became animated. “What,” somebody said, “about China and India?” There was a nodding of heads, and a view emerged that was pessimistic, even fatalistic. Manufacturing jobs were being lost to China at an alarming pace, and the service sector was on a similar passage to India. A seismic shift was taking place and things would never be the same again. Where would the jobs of the future be? China and India, with their enormous pools of cheap labour, increasingly educated workforces and access to the latest technology, that was where. What do we do when China and India can do everything? Whether it was that or the plastic “Made in China” badminton set from Marks & Spencer – made at such low cost it was given away free with a few tubs of prepared salad – a new angle on China and India popped up virtually every day. India was grabbing, not just back-office and call-centre jobs but everything from stockbrokers’ research to medical testing and diagnosis. What hope for the young people of Britain, America or Europe? Should everybody start praying, and learning Mandarin? The story of China (the Dragon) and India (the Elephant) did not suddenly emerge; China’s economy has been growing at just under 10% a year for nearly three decades and India has been doing its best to catch up for a decade and a half. But they have now achieved critical mass, and together they represent the biggest power shift of our lifetimes. They are, to start with, the biggest thing ever to hit the world economy. Two huge countries, each with populations of well over a billion (1.3 billion China, 1.1 billion India) have GDPs growing like tigers – 10-11% China, 8-9% India – and that has never happened before. Perhaps the decisive statistic is provided by Richard Freeman, a professor of economics at Harvard: the emergence of China and India and the collapse of the Iron Curtain has effectively doubled the number of people actively engaged in the world economy. Having said China and India are the biggest thing to hit the world economy, it may seem perverse to argue that we should not be overimpressed. More than a quarter of the world’s 100 biggest cities are in China and India, and many of them are frighteningly large. Chongqing on the Yangtze is becoming the world’s biggest conurbation, with 31m people already and a population that has been doubling every 10-15 years. But we should put these populations into perspective. The reality of life for most Chinese is not urban living or gleaming new factories owned by multinationals. For the majority, an officially estimated 750m, it is the often grinding poverty of rural life. Even in 2030, according to the Chinese government’s own estimates, 600m people will still live in the country. They are not part of the world-beating competitive labour force the rest of the globe fears. This is even more the case in India, where more than 70% of the population lives in the countryside, and where the rural population grew by 200m over the period 1981-2001. The world has become obsessed with India’s IT and outsourcing sector, but it employs only 1.3m people directly, barely 0.1% of the population. Big populations need feeding and warming, however, and China and India will stretch the world’s resources. China now outconsumes America in four of the five basic commodities – grain, meat, steel and coal – oil being the only exception. China consumes nearly 50% more grain and twice as much meat as America. Half the world’s pigs are in China. China is second only to America in energy use. India is the fifth biggest user of energy. Extrapolate the existing growth figures and within a few decades China would be consuming more oil than the world is capable of producing. It will not happen, of course, which is why I argue that, despite the enormous environmental challenges these countries pose, they won’t destroy the planet. Their growth will require lots of energy, and it will produce lots of carbon emissions. Roughly, every 1% of economic growth in China and India requires an increase of 1% or more in energy use, compared with half or a third of that even in profligate America. But that does not mean efforts to cut emissions in the West are futile. The rise of China and India has brought greater urgency to the task of containing global emissions. It is possible, indeed, to combine rising energy demand in China and India with a drop in global emissions. Price Waterhouse Coopers did just this in a set of projections looking forward to 2050 in which global economic growth could average 3.2% a year but carbon emissions decline by 0.4% annually. How will the two leviathans change the balance of power geopolitically? They will certainly flex their diplomatic and military muscles, making current groupings such as the G8 (which includes neither China nor India) and the UN security council (whose permanent membership does not include India) appear redundant. But they will not start a new cold war, despite the fact that both are nuclear powers, and each have well-known tensions over Taiwan and Kashmir. Unlike the former Soviet Union, China has no interest in risking the stability of a global economy, given its own interdependence with the rest of the world. India is genuinely not an aggressive power. Any war with China and India will be fought on the economic battleground. For multinational companies, of course, the prospect of new markets of over a billion people each is highly alluring, and both countries will provide huge opportunities. On a visit to Beijing, I was staying in a hotel attached to a new shopping mall where Prada, Gucci, Armani and Ferragamo, among many others, offered their wares at prices that looked far too high for the hotel’s international guests, let alone the locals, but the shoppers were almost exclusively Chinese. India is also a fast-growing market, with many of the same features as China – a rapidly growing middle class and an expanding elite of the super-rich. Having said that, we should put the newly prosperous of both countries into perspective – on average they are and will remain relatively poor. On the measure used by the World Bank and other international bodies, China’s GNI (gross national income) per capita is just $1,740 (£870), while India’s is much lower, at a mere $720. Think about that for a second. India’s average income is less than two dollars a day which, given that it has quite a few billionaires and a growing middle-class, means it also has plenty of very poor people. China does better, but still averages less than five dollars a day. For all the talk of billionaires, millionaires and expanding middle classes, neither country yet makes it into the world’s top 100 in terms of average living standards, however measured. That will change, but not as much as people think. Even if everything goes pretty much right for China and India, their citizens will be a long way from being rich by the middle of the century. Will everything go right? It can be guaranteed that both countries will hit economic and political turbulence. How they handle it will do much to determine how far they rise. Some argue that China’s political system could not survive a significant economic downturn; others that the Indian miracle is much more fragile. What the rest of the world should not do is add to their problems by pulling up the drawbridge. The political pressures are growing, in America but also in Europe, for protectionist measures against these low-cost emerging economic superpowers. That would be a big mistake. Their emergence is a triumph for the world economy. They bring threats but also enormous opportunities. The biggest mistake we could make is to try to put them back in their box. From The Sunday Times, April 29 2007]]> http://www.economicsuk.com/bookblog/2007/11/book_extract.html http://www.economicsuk.com/bookblog/2007/11/book_extract.html Thu, 01 Nov 2007 00:01:01 +0000 Amazon.com and other booksites are now taken pre-orders for The Dragon and the Elephant. Click here to get your copy.]]> http://www.economicsuk.com/bookblog/2007/10/preorder_now.html http://www.economicsuk.com/bookblog/2007/10/preorder_now.html Mon, 01 Oct 2007 00:01:01 +0000

]]> http://www.economicsuk.com/bookblog/2007/09/introduction.html http://www.economicsuk.com/bookblog/2007/09/introduction.html Sat, 01 Sep 2007 00:01:01 +0000 'The Dragon and The Elephant' is the latest book from David Smith, Economics Editor of The Sunday Times. This site will support the book launch, with exclusive extracts and previews. Don't forget to check out David's main site - EconomicsUK. Buy the Book here: ]]> http://www.economicsuk.com/bookblog/2007/08/about_david_smith.html http://www.economicsuk.com/bookblog/2007/08/about_david_smith.html Wed, 01 Aug 2007 00:01:01 +0000 EconomicsUK site.]]> http://www.economicsuk.com/bookblog/2007/07/coming_soon.html http://www.economicsuk.com/bookblog/2007/07/coming_soon.html Sun, 01 Jul 2007 00:01:01 +0000