Helping China overcome wage inflation in its coastal cities is "the flood of Western technology and know-how that has come on the back of successive waves of investment ", enabling Chinese companies " to innovate, reduce costs and compete internationally with their foreign peers."
The report suggests that heavy equipment manufacturers, particularly in the construction machinery sector, will be in the vanguard of this trend. The EIU expects China to overtake Germany and Japan in exports of construction machinery by the end of this year to become the world’s second largest exporter of construction equipment after the US. As most construction and mining activity is happening in developing countries, this will mean increased competition for the likes of Caterpillar in the years ahead.
Across the board, China’s ability to penetrate developed markets will be limited, but that doesn’t lessen their impact on Western manufacturers exporting to developing markets. In addition to construction machinery, China will soon be exporting high-speed trains, trucks and in time, even commercial aircraft, just as they have saturated the wind turbine and solar panel markets.
2. Carlos X Alexandre takes the opposing view that China's Future Economic Power Will Disappoint.
Let’s put some perspective on the issue: China can build bullet trains, refurbish old Soviet aircraft carriers – the “new” one was bought from the Ukraine in 1998 -- but can’t raise enough pigs to feed its population. As a side note, a lower dollar has no effect on swine breeding because pigs are not picky eaters.
And on that basis, a country that cannot tend to the basic needs of its population, will become the world’s financial center. Enough said. Ivory tower thinking may foster the publication of impressive glossy papers, but I learned pig slaughtering and sausage making from my grandmother, not my MBA.
Lastly, Reuters reported today that Fitch Ratings – I know, these guys are unreliable -- announced that it may downgrade China within two years "as the country's banks struggle with debt loads following a lending surge to help lift the economy during the 2008 financial crisis." Dismissing Fitch is easy, but not the Chinese debt that lurks in the shadows.