China is the world’s leading it exporter

China’s economic growth, which again this year was only just below ten percent, is keeping the world on its toes

China’s hunger for raw materials and food is driving producer prices to unprecedented heights, offering new hope for many a developing country. Meanwhile, between Frankfurt and Seattle, the prospect of a market of 1.3 billion people who could have the purchasing power of today’s Poles in perhaps a decade’s time has many an executive’s dollar sign flashing in his eyes. In a few years, Chinese consumers will be able to jump-start the chronically sluggish economy of the euro zone?

By 2010, for example, China will need 500 passenger aircraft in addition to the 70 Boeing 737s and 150 Airbus A320s for which contracts were recently signed, Commerce Minister Bo Xilai said Monday. And this will not be the end of the line. But while China’s 800 million villagers will certainly still be living in extremely modest conditions ten years from now, Goldman Sachs expects China to be the world’s largest importer of luxury goods by then.

It is not only the sheer scale with which the Chinese market will have a significant impact on the world economy in just a few years that is breathtaking, but also the speed at which China is catching up technologically. While the textile industry in Europe and the United States is still grappling with the onslaught of Chinese imports, which will make the expiration of the longstanding international quota regulations effective on 1 January 2009, the Chinese industry is still struggling to survive. While China’s economy has been on a downward spiral since January, China’s exporters are already attacking on a completely different front: In 2004, the People’s Republic surpassed the United States in exports of information technology, according to the Organization for Economic Cooperation and Development (OECD). This is the first time that the country of the center has taken the lead in this important sector.

China is the world's leading it exporter

IT exports in billions of US dollars. Graph: OECD

Last year, notebooks, PCs, cell phones, digital cameras and the like worth $180 billion fell in love with Chinese ports. The USA, on the other hand, "only" managed an export volume of 149 billion US dollars. This was also an increase of 12% over the previous year, but no one can compete with Chinese growth rates: in 2003, China’s IT exports grew by 55% and in 2004 by 46%. In the first eleven months of this year, IT exports increased by another 32.5% to 194.64 billion US dollars.

At the same time the People’s Republic is importing electronic goods in considerable volume. In the first 11 months of 2005, for example, in the value of 177.05 billion US dollars. Some of these are IT components. In particular, the latest chip generations are being imported because the Chinese industry has not yet caught up technologically with the world leaders. The government in Beijing, however, is determined to eliminate this shortcoming. The final details of a long-term innovation program are being worked out these days, Deputy Minister of Science and Technology Cheng Jinpei announced recently. The program, which will determine the development of science over the next 15 years, aims to modernize existing research facilities and link them more closely with the economy.

China is the world's leading it exporter

IT imports in billions of US dollars. Graphic: OECD

Even in nominally socialist China, science is increasingly geared to the needs of the marketplace. This development is also required by the fact that many international companies have established research and development departments in China or are planning to do so in the near future. The Beijing government is calling for these settlements by force in the hope of a spill-over effect. Already today, quite a few of the company founders have begun their careers in one of the countless joint ventures of foreign corporations. The same is to be expected in the field of research.

Meanwhile, China’s lack of manufacturing capacity for the most advanced chips can also be explained by Taiwan’s policies. The local manufacturers are keen to build chip factories on the mainland, but the government in Taipei fears too close economic dependence on the big neighbor, the loss of the know-how advantage and thus also of jobs at home. Therefore, Taiwanese chip manufacturers have simply been forbidden to export their latest production technology to the mainland. The island state, which Beijing regards as a remote province, is one of the major beneficiaries of the Chinese export boom made in China stuck chips made in Taiwan. Other neighbors such as Sud Korea, Malaysia and Japan have also increased their IT exports to the People’s Republic, while the EU and the US have lost market share. So the IT industry is doing its part to help East Asia, which meets for its first joint summit on Wednesday, grow together.

If the East Asian Community discussed there actually takes shape in the next decade, China will certainly no longer be the sweatshop of the world that it is today. The technology and corporate policy of the government in Beijing is aimed at transforming the country into an industrialized state with companies that will become world leaders in the coming decades.

A good example is the PC manufacturer Lenovo, which took over IBM’s PC division in the spring. This means that the Chinese market leader is now, at a stroke, one of the global players in the industry. As the latest business figures show, within a few months they have managed to make the loss-making business, with which IBM was no longer happy, profitable again. Especially in the emerging markets, where other Chinese companies have long had more than one fub in the tower, the country is in the black. Is it any wonder that there are about 30 million college and university students learning Chinese in 85 countries and that the People’s Republic cannot train as many teachers as are required??

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