Friday, 20 March 2015

Made in China? By The Economist print edition: Leaders March 14th 2015

BY MAKING things and selling them to foreigners, China has transformed itself—and the world economy with it. In 1990 it produced less than 3% of global manufacturing output by value; its share now is nearly a quarter. China produces about 80% of the world’s air-conditioners, 70% of its mobile phones and 60% of its shoes. The white heat of China’s ascent has forged supply chains that reach deep into South-East Asia. This “Factory Asia” now makes almost half the world’s goods.

China has been following in the footsteps of Asian tigers such as South Korea and Taiwan. Many assumed that, in due course, the baton would pass to other parts of the world, enabling them in their turn to manufacture their way to prosperity. But far from being loosened by rising wages, China’s grip is tightening. Low-cost work that does leave China goes mainly to South-East Asia, only reinforcing Factory Asia’s dominance. That raises questions for emerging markets outside China’s orbit. From India to Africa and South America, the tricky task of getting rich has become harder.

Printing Money to Help the Poor

In much of the Western world, two highly successful economic policy initiatives are coming to an end. Quantitative easing, the creation of money by central banks to purchase financial assets, is likely to have run its course in most countries by the end of 2015. Next year is also the deadline for hitting the United Nations’ Millennium Development Goals—eight ambitious global aid targets, ranging from halving extreme poverty to reducing child mortality and combating HIV.
Both initiatives have changed the world for the better. In the wake of the 2008 financial crisis, quantitative easing reawakened the world economy’s “animal spirits” when nothing else seemed capable of doing so.