SEOUL, South Korea (AP) - Shin Cheol-soo no longer sees his future in the United States.
The
South Korean businessman supplied components to American automakers for
a decade. But this year, he uprooted his family from Detroit and moved
home to focus on selling to the new economic superpower: China.
In just five years, China has surpassed the United States as a
trading partner for much of the world, including U.S. allies such as
South Korea and Australia, according to an Associated Press analysis of
trade data. As recently as 2006, the U.S. was the larger trading partner
for 127 countries, versus just 70 for China. By last year the two had
clearly traded places: 124 countries for China, 76 for the U.S.
In the most abrupt global shift of its kind since World War
II, the trend is changing the way people live and do business from
Africa to Arizona, as farmers plant more soybeans to sell to China and
students sign up to learn Mandarin.
The findings show how fast China has ascended to challenge America's
century-old status as the globe's dominant trader, a change that is
gradually translating into political influence. They highlight how
pervasive China's impact has been, spreading from neighboring Asia to
Africa and now emerging in Latin America, the traditional U.S. backyard.
Despite China's now-slowing economy, its share of world output and
trade is expected to keep rising, with growth forecast at up to 8
percent a year over the next decade, far above U.S. and European levels.
This growth could strengthen the hand of a new generation of just-named
Chinese leaders, even as it fuels strain with other nations.
Last year, Shin's Ena Industry Co. made half his sales of rubber and
plastic parts to U.S. factories. But his plans call for China, which
overtook the United States as the biggest auto market in 2009, to rise
fivefold to 30 percent of his total by 2015. He and his children are
studying Mandarin.
"The United States is a tiger with no power," Shin said in his
office, where three walls are lined with books, many about China.
"Nobody can deny that China is the one now rising."
___
Trade
is a bit like football - the balance of exports and imports, like the
game score, is a neat snapshot of a jumble of moves that make up the
economy, and both sides are apt to accuse each other of cheating from
time to time. Also, the U.S. and China are both rivals and partners who
can't have a match without each other, and a strong performance from
both is good for the entire league.
Trade may get less publicity than military affairs or diplomacy, yet
it is commerce that generates jobs and raises living standards. Trade
can also translate into political power. As shopkeepers say, the
customer is always right: Governments listen to countries that buy their
goods, and the threat to stop buying is one of the most potent
diplomatic weapons.
China has been slow to flex its political muscle on a large scale but
is starting to push back in disputes over trade, exchange rates and
climate change.
"When a German chancellor or French president goes
to China, right at the top of the list, he's trying to sell Airbuses
and other products and is being sensitive to China's political concerns,
like on human rights," said C. Fred Bergsten, a former U.S. Treasury
Department official who heads the Peterson Institute for International
Economics in Washington.
The United States is still the world's biggest importer, but China is
gaining. It was a bigger market than the United States for 77 countries
in 2011, up from 20 in 2000, according to the AP analysis.
The AP
is using International Monetary Fund data to measure the importance of
trade with China for some 180 countries and track how it changes over
time. The analysis divides a nation's trade with China by its gross
domestic product.
The story that emerges is of China's breakneck rise, rather than of a
U.S. decline. In 2002, trade with China was 3 percent of a country's
GDP on average, compared with 8.7 percent with the U.S. But China caught
up, and surged ahead in 2008. Last year, trade with China averaged 12.4
percent of GDP for other countries, higher than that with America at
any time in the last 30 years.
Of course, not all trade is equal. China's trade is mostly low-end
goods and commodities, while the U.S. competes at the upper end of the
market.
Also, even though Chinese companies invest abroad and
employ thousands of foreign workers, they lag behind American industry
in building global alliances and in innovation, which is still rewarded
in the marketplace. China's competitive edge remains low labor and other
costs, while the U.S. is the world's center for innovation in autos,
aerospace, computers, medicine, munitions, finance and pharmaceuticals.
The Chinese have yet to build a car that will pass U.S. or European
emission standards.
And the United States still does more trade overall - but just
barely. If the trend continues, China will push past the U.S. this year,
a remarkable feat for a country so poor 30 years ago that the average
person had never talked on a telephone.
"The center of gravity of the world economy has moved to the east,"
said Mauricio Cardenas, the finance minister in Colombia. Like most of
Latin America, his country is still more closely tied to the U.S., but
its trade with China has risen from virtually nothing to 2.5 percent of
GDP, a more than tenfold increase since 2001. "I would say that there is
nothing comparable in the last 50 years."
In one sense, China's growing presence in trade is just restoring the
Middle Kingdom to its historic dominance. China was the biggest economy
for centuries until about 1800, when the industrial revolution
propelled first Europe and then the U.S. into the lead.
China began its return to the global stage in the 1990s as a
manufacturer of low-priced goods, from T-shirts to toys. Factories in
other countries slashed costs to meet the "China price" or were pushed
out of the market.
As the new millennium dawned, the U.S. remained by far the world's
dominant trader, rivaled collectively by Europe but no single nation.
However, from 2000 to 2008, China's imports grew 403 percent and exports
474 percent, driven in part by its entrance into the World Trade
Organization and its move to higher-value production.
China's imports of oil and raw materials for its factories propelled
resource booms in parts of Asia, Africa and Latin America. China's
demand for steel for manufacturing and construction grew so fast that
its mills now consume half the world's output of iron ore.
Zambia, a major copper producer, switched to the China column in
2000. Australia, a coal and iron ore exporter, followed in 2005. Chile,
another copper supplier, moved in 2009.
Meanwhile, exports surged
as Apple, Samsung, Nokia and other electronics giants shifted final
assembly to China. Shipments of mobile phones, flat-screen TVs and
personal computers have jumped sevenfold over the past decade to nearly
$500 billion. That made China a major customer for high-tech components
supplied by countries such as South Korea, which swung into China's
column in 2003, followed by Malaysia in 2007.
In the U.S., Vermont-based manufacturer SBE Inc. started exporting
capacitors - energy-storage devices used in computers, hybrid cars and
wind turbines - in 2006. The company now gets 15 to 20 percent of its
revenue from China, and has hired 10 employees there.
As China grew richer, its people spent more.
Chinese ate more
pork, fried chicken and hamburgers, rapidly sending up the demand for
soybeans to make cooking oil and feed for pigs and cows. Some cattle
ranchers in Latin America turned grazing land into fields of soy, a crop
few in their region consume. Soybean exports helped push Brazil into
the China column in 2010, and put China neck and neck with the U.S. as
Argentina's top trading partner.
In the Brazilian state of Mato Grosso, some 10,000 miles (17,000
kilometers) from Beijing, farmer Agenor Vicente Pelissa and his family
raise cattle and soy on 54,300 acres, a farm twice the size of
Manhattan. Half their 21,000-ton annual soybean harvest goes to China.
"We've invested more in technology and in better machines and
equipment to meet this rising demand," Pelissa said. "If it hadn't been
for China, we would not have not modernized our operations, at least not
as quickly as we did."
Even in the U.S., better known for manufacturing, farmers are rushing
to sell to China. The United States is the largest exporter of soybeans
to China, followed by Brazil and Argentina. China's purchases of
American soybeans have risen from almost nothing 20 years ago to a
quarter of the crop: 24 million tons worth $12.1 billion, America's
largest export to China.
The boom is having a profound effect on farming communities, said
Grant Kimberley, whose family farm near Des Moines, Iowa, now grows
4,000 acres of soybeans, up from 3,500 eight years ago.
"It's
provided more revenue for these farmers than they've ever seen in their
lives," said Kimberley, who is also director of market development at
the Iowa Soybean Association. He said he sees more young people
returning to the farm. "People can see there's an opportunity to make
nice livings for their families."
___
It was the 2008 global crisis that showed the resilience of China's exporters.
The
recession set everyone back, but China less so than the U.S. or other
major traders such as Germany. China does a bigger share of its trade
with developing countries that suffered less and rebounded faster, while
the United States sells to rich economies that are struggling. Chinese
companies have boosted exports by 7 percent this year despite anemic
global demand.
During the recession, Shin, the South Korean auto parts manufacturer,
saw his sales fall 50 percent. He shut one of three production lines,
and banks stopped lending him money.
But China's auto market was
powering ahead. So Shin hired an employee in China, and is now making
plans for his first factory there. On a business trip to Germany,
clients told him their Chinese factories would be larger than those at
home.
Parents like Shin, who work at companies doing business with China,
in turn fed enrollment growth at schools such as Teacher Ching, a
Chinese-language kindergarten in Seoul.
Nancy Ching, the daughter
of immigrants from Taiwan, opened the school with 15 students in 2004,
the year after South Korea first moved from the U.S. column to the China
column. Today she has 60.
"Mothers who send their kids here believe our children's generation
is the China generation," she said in Chinese-accented Korean. "In the
future, without learning Chinese, one won't be able to get a job."
China resumed its upward trajectory in the last two years. Even with
key Western markets in a slump, exports are up 58 percent since 2009.
Imports are up an even sharper 73 percent.
Rising incomes have
driven demand for wine and other luxury goods, making China a lifeline
for European and American vineyards when the global crisis battered
traditional markets.
The Chinese have "helped Bordeaux a lot these past three years," said
Florence Cathiard, owner of Chateau Smith Haut Lafitte in the
Pessac-Leognan area of France's southwest, home of high-end Bordeaux
wine.
France's wine exports to China first surged in 2009, and by last
year, China had surpassed the U.S. as a customer by volume. Americans
still spend more, because they buy more expensive wines. But China is
developing a taste for grand cru wine, the "great growths" that are
considered exceptional and command higher prices.
Cathiard acknowledged that she was initially wary of China as a
reliable market for her high-end wines. But the turning point for her
came around 2008, when she was blown away by the number of people
showing up for a master class by her chateau at a wine expo in Hong
Kong.
China now accounts for 25 percent of Cathiard's sales, making it her largest market.
The
owners of Chateau Haut-Bailly, also in Pessac-Leognan, first traveled
to China to test the waters in 2000, and it was too early.
"At the time, they didn't know what a cork or a corkscrew was," said Veronique Sanders, the chateau's general manager.
Chinese sophistication has since advanced rapidly, she said.
"The
difference with other emerging markets we've gone into in the past is
the size of the country, which means it has an absolutely incredible
potential."
___
The next step in China's trade evolution is to move beyond
exporting TVs and lawn furniture to selling services and investing
abroad.
The investment trend started with state-owned companies
that bought stakes in foreign mines and oil fields. Smaller and private
Chinese companies followed, acquiring foreign enterprises to gain a
bigger foothold in overseas markets, more access to resources and better
technology for their own development.
China is now pushing into construction and engineering, where U.S. and European companies have long dominated.
In
Algeria, Chinese state-owned companies pushed aside established French
and German rivals to win contracts to build a $12 billion cross-country
highway and the $1.3 billion Great Mosque of Algeria. The Chinese have
also built highways, dams and other projects in developing countries and
are starting to win contracts in the U.S. and Europe.
On a new 50-kilometer (30-mile) highway leading north of Nairobi, the
capital of Kenya, dark asphalt stretches across six to eight lanes.
The
$300 million road was built by three Chinese companies and financed by
the African Development Bank and the Export-Import Bank of China. It has
cut a trip that took several hours 18 months ago to 10 minutes, said
Joseph Makori, a professional driver.
"When we see the people from America, they say, 'We want to assist
Kenya'," said Makori as he looked for work at an interchange about 10
kilometers from downtown. "But I don't see it. China comes and I see one
thing: the road."
Chinese companies are starting to win government contracts in Kenya,
which has ports that offer access to landlocked Uganda, South Sudan and
Rwanda. Governments in Africa are keen to work with China because it
does not tie development to human rights or democracy, said Stephen
Mutoro, secretary general of the Consumer Federation of Kenya.
"China appears to have a long-term plan based on increasing its
commercial interests where governance issues are given a back burner,"
Mutoro said. The experience of Congo might foreshadow a more
complex approach that Beijing envisages for other African nations. In
2008, the two governments signed a $9 billion deal for Chinese companies
to build 177 hospitals and health centers, two hydroelectric dams and
thousands of miles of railways and roads. In exchange, Congo was to
provide 10.6 million tons of copper and 600,000 tons of cobalt.
The deal has since been scaled back to $6 billion under pressure from
the International Monetary Fund, which felt Congo was taking on too
much debt.
China's outbound investment totaled $67.6 billion last
year - just one-sixth of America's nearly $400 billion - but it could
reach $2 trillion by 2020, according to a forecast by Rhodium Group, a
research firm in New York City.
As a result, Chinese companies are using a new export - jobs.
Employees
at Volvo Cars worried after Chinese automaker Geely Holdings bought the
money-losing Swedish brand from Ford Motor Co. in 2010. But two years
later, instead of moving jobs to China, Geely has expanded Volvo's
European workforce of 19,500 to about 21,500.
Majority-owned U.S. affiliates of Chinese companies support about
27,000 American jobs, up from fewer than 10,000 five years ago,
according to Rhodium.
In Goodyear, Arizona, Stacey Rassas was laid
off in May 2010 after a 16-year career in quality control for aerospace
and aluminum manufacturers. By late autumn, she and her husband were
worried they might lose their house.
She finally landed a job that December at a new factory that makes
solar panels for one of the world's biggest solar manufacturers.
"It was the best day ever," she said.
Her new employer? Suntech Power Holdings Co., a Chinese company.
___
McDonald reported from Beijing. AP Business Writers Sarah
DiLorenzo in Paris and Jonathan Fahey and Scott Mayerowitz in New York
and AP writers Michelle Faul in Johannesburg; Louise Nordstrom in
Stockholm; Luis Andres Henao in Santiago, Chile; Cesar Garcia in Bogota,
Colombia; Paul Schemm in Algiers, Algeria; Stan Lehman in Sao Paulo;
Troy Thibodeaux in New Orleans; and Jason Straziuso and Tom Odula in
Nairobi, Kenya; and AP interactive producer Pailin Wedel in Bangkok
contributed.
Copyright 2012 The Associated Press.
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