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SUNDAY POUCH

China tops: Now US gasps when China buys!

The rise of China may be making the US political leaders nervous. But the attitudes in the US have to change, because the US will not permanently be the global leader. Some analysts say that the US would be playing a role to China 'similar to the role UK plays to USA today.1 But let us see how history finally plays out.

Ashfaqur Rahman
TWO news items, in particular, had attracted our attention last week. The first was that the Chinese economy is likely to overtake that of the USA and become number one in the world, five years earlier than expected. This was revealed by no less an authority than the International Monetary Fund (IMF). The other news that drew our interest was that a nondescript Chinese insurance company Anbang has managed
to build up the capital and connection to broker the largest deal ever by a Chinese investor for an American building. It will pay $1.95 billion for the 47 storey tower owned by Hilton Worldwide Holdings. The building is no less well known. It is the regal Waldorf Astoria Hotel in midtown Manhattan.
Let us take the news of the Chinese economy overtaking the US economy first. The IMF figures show that the Chinese purchasing power will be overtaking the US this year (2014). China will be accounting for $17.63 trillion (16.48%) of global purchasing power adjusted growth by December. Compare this to $17.41 trillion (16.28%) for the US in this period. It was not expected to surpass the US until 2019. So China seems to be galloping ahead at a steady rate. By 2019, the Chinese economy is likely to be a whopping $27 trillion. It
is a big setback for the US.
Since 1872, the US had overtaken Britain to be the biggest economy in the world. Today, with China overtaking it, there would be great political and economic implications for the world.
There were four reasons that had kept the US economy in top of the world for the last 142 years. These were 'productivity, leading brands and innovation, success of the US dollar and the fact that 62 % of the world's financial reserves are held in the US currency.' But do not forget this. China was the world's leading trading nation till the 18th century. But then European colonial powers like Britain, France, Germany, and Portugal annexed some of its major ports. The trade balance had then shifted in favour of the coffers of these imperial powers. China became a slothful, inward looking and an economically backward country. However, from 1979, China allowed foreign investment. First, it was spurred by its own Diaspora. Then it was direct foreign investment. Due to friendly investment policies, the Chinese economy opened up. Today the economy being free from the shackles of myriad rules and bureaucracy, the Chinese are shooting up to the sky. Yet there are strong critics. Many say that per capita income of USA is $50,000 and Japan $37,000. China's per capita is only $ 6,000. Yet there are over 2 million dirt poor in the USA who sleep in dirty alleys and dig through trash for food. The wealth in thehands of the Americans is not distributed equally and so the per capita calculation is a non- starter in many ways.
The other sensational news that China has started to buy up some crown jewels of the US economy is startling. Big Chinese companies like Ali Baba, Baidu, Huawei and Wanda have pioneered this move. Recently, however, smaller companies who have deep pockets are appearing on the world scene and buying up some prime assets. In the last two years, the Chinese have purchased some iconic properties. These include the Lloyd's London building, the One Chase Manhattan Plaza in New York, etc. One Shanghai developer called the Greenland Group has purchased 70 % of the $5 billion Atlantic Yards project in the borough of Brooklyn. Recently, the Chinese have purchased Smithfield Foods in the USA. By that they suddenly owned 460 large farms and became the largest pork producer and processor in the world. Smithfield has facilities in 26 US states and employs tens and thousands of Americans. It has contracts with 2,100 other companies. In fact, by purchasing Smithfield, the Chinese have become the most important employer in dozens of rural communities all over the USA.
An interesting development is that the Chinese have shown deep interest in buying assets in the economic depressed areas of the USA They are gobblingup factories and processing facilities in Detroit, Michigan, etc. at lower than market prices. One of the most ambitious projects of the Chinese seems to be in the state of New York. They have proposed to construct a multi-billion dollar 'China city' in a 600 acre area in a remote part of
the state, called Yankee Lake in Sullivan County, New York. The Chinese company wants to ultimately spread this city to 2,000 acres. Besides some big real estate projects, the Chinese are also involved in a wave of real estate purchases that are quiedy taking place all over the USA. One can see Chinese buying up new development projects as far away as Irvine in California.
Coming back to Waldorf Astoria, the acquisition by Anbang insurance is a big deal. This hotel was opened in 1931 and had been a hotel of choice for world leaders. US President Barack Obama also stayed there this year during the UN General Assembly session. The Anbagh will renovate 1,400 or more rooms of the hotel and restore its traditional ambience. The Chinese also have abiding links with this hotel. Supreme leader Deng Xiao Ping was also hosted in this hotel when he came to the USA for the first time.
The rise of China may be making the US political leaders nervous. But the attitudes in the US have to change, because the US will not permanently be the global leader. Some analysts say that the US would be playing a role to China 'similar to the role UK plays to USA today.' But let us see how history finally plays out.
The writer is a former Ambassador and a commentator on current issues. E-mail: ashfaque 303@gmall.com