AMERICAN FIRMS RUSHING TO BUILD IN CHINA
MUNCIE, Ind. - China is on the brink of becoming a major economic power, says a Ball State University economist.
Economic reforms and open-door programs have provided a powerful impetus for development, said Chu-yuan Cheng, a business professor specializing in the economic trends of Pacific Rim nations.
"Reform dismantled the highly centralized planning system by returning to a market economy," Cheng said. "The open-door policy helped to attract large-scale foreign investment that rose from virtually zero in 1978 to $400 billion by the end of 2001."
The market economy helped China's gross domestic product grow at an annual rate of 9.7 percent over the last 20 years, he said.
"China has enjoyed an unprecedented period of rapid growth and will keep the momentum in years ahead," Cheng said. "Economic forecasters in the United States, Western Europe and Japan all project China will become the world's largest market for consumer products and a major center for manufacturing."
American corporations have rushed into China seeking to win over its population of 1.3 billion people and a middle class expected to grow to 500 million by 2010.
McDonald's has 400 restaurants in the country and plans to add 100 outlets annually. Major corporations such as General Motors, Dupont, Intel, Motorola, Wal-Mart, Eastman Kodak and KFC have made major investments in China.
"With its membership in the World Trade Organization, fields such as telecommunications, banking and insurance are now open for foreign investment," Cheng said. "U.S. multi-national companies have an edge in these areas."
As China moves toward modern industrialization and globalization, Cheng believes there are also unavoidable social and economic effects.
These include widespread corruption, widening income gap between rich and poor, and rising unemployment as the government tries to increase efficiency of state-owned enterprises by shedding unneeded employees.
"As long as the Chinese economy continues to expand, many of these problems may gradually fade away," Cheng said. "The Chinese economy may then form a circle of growth when economic success causes further reform and impedes any attempt to return to the old system."
(NOTE TO EDITORS: For more information, contact Cheng at ccheng at bsu.edu or (765) 285-5366. For more stories, visit the Ball State University News Center at www.bsu.edu/news on the World Wide Web.)
Marc Ransford 3/29/02
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