Dan Watson, Contributing Writer
There is an old expression from the 50s often thrown around in the financial market that says “when the U.S. gets a cold, the rest of the world gets pneumonia.” A
somewhat colloquial expression which attempts to convey the
influence and impact that Wall Street and the U.S. has on the
global financial market. However, as we have all seen, nothing
remains the same forever. A new contender for the premier position has arrived on the scene.
China has been in the news a lot recently. Especially, with the
recent turmoil in the financial markets. But just how important
is China’s economy to the U.S. and the rest of the world? Can
what happens in China really influence and impact main street
USA and the rest of the world? Is China still an opportunity
for investment? To answer all these question we need to a bit of
searching into China’s rich and colorful history.
In the 1930s, China had carved out its position as the premier
financial center of the Far East. This lofty title ended in 1949
following a bloody four-year civil war. Emerging on the scene
was the victorious Peoples Liberation Army who immediately installed a communist form of government. From that moment to
today China is known as the People’s Republic of China (PRC).
The new regime set about to remake China in the image of their
communist based ideology. Businesses became state-owned which
meant that all profits generated were confiscated by the Chinese
government. Supposedly a portion of all profits confiscated were
used to purchase improved technology that would help modernize certain industries. However, because China at that time was a
closed economic system, what little data that is available indicates
that its total output (GNP) was extremely low. As a result the
amount of funding for modernization was not that great. The end
result of this situation was that China was unable to keep pace
with the rest of the world and its economic growth was essentially
zero. China soon found itself at a crossroad and realized that in
order to survive in the emerging global market that it had to make
some significant changes and do so quickly.
Change for China at that time was not easy nor was it
quick. The first break for China’s desire to change happened in
1971 when Dr. Henry Kissinger traveled to China. A year later
President Richard M. Nixon became the first U.S. president to
visit the PRC. His mission was merely to create more normal relations between China and the United States. However, his visit
allowed the world to be exposed to the first images of China
in over two decades. The trip by Nixon did helped the United
States to create an alignment with their one-time, cold-war enemy. It also opened up the potential of future trade between the
two countries.
In case you might be wondering why China wanted to
obtain growth and become more a part of the global market
the answer is fairly simple. It’s a proven fact that a growing
economy helps to bring about overall stability. History reveals
that many country revolutions begin because the poor were
oppressed by rich. When a country’s economy is stagnant for
an extended period of time what we notice is the shrinking
of the middle-class which brings about and expansion of the
Is China still an opportunity for investment?
CHINA –
A Maturing Economy
