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Last Updated: Monday, 13 October, 2003, 00:31 GMT 01:31 UK
China's tearaway economy sparks envy

Mary Hennock
BBC News Online business reporter in Shenzhen

Andrew Tsuei's job is to fill the shelves of Wal-Mart, the world's biggest retailer. He heads a chain of 23 buying offices scouting for goods in 50 countries.

Worker loading containers at Yantian port, Shenzhen
World trade growth is sluggish so China's exports are a visible target
Mr Tsuei's own sleek silver and grey HQ is in Shenzhen, a Chinese city so new that it was paddy fields just 25 years ago.

Today Shenzhen is the gateway to the world's biggest manufacturing zone. Shipping-firm Orient Overseas Container Line this year named the world's largest container ship after it - the OOCL Shenzhen.

The rise of Shenzhen's Pearl River Delta hinterland into a global manufacturing powerhouse has fuelled admiration, and - increasingly - envy among the top developed nations.

Challenger?

China's economy is growing at roughly 8% a year, easily outperforming G7 countries. Economists think it could overtake the United States as the world's biggest economy by mid-century.

It has a bigger trade surplus with the US than Japan, Asia's last miracle growth story, and last year it displaced Britain as the world's fifth biggest exporter.

China has arrived at the world's top table and the hosts are increasingly nervous.

It is accused of sucking jobs and growth from somewhere else - usually the US or Hong Kong - and a vociferous US Congressional lobby wants it punished.

US demands for forced currency reforms have been echoed by the International Monetary Fund (IMF) and G7 club of advanced economies.

Experiment in success

Guangdong province, up the Pearl River from Hong Kong contributes 10% of China's economy, pours out one third of China's exports, and has pulled in one third of China's total foreign investment.

Few people around the world had heard of this region until it became the birthplace of the deadly Sars flu outbreak.

Container port volumes 2002
Yantian port, Shenzhen
Hong Kong - 18m Teu
Los Angeles + Long Beach - 12m Teu
Shenzhen's two ports - 7.5m Teu
Rotterdam - 6.5m Teu
Felixstowe - 4m Teu
1 Teu = 1 x 20 foot container
Source: Hutchison Port Holdings

But its global economic importance has been snowballing since China's Communist rulers decreed an experiment in capitalist economics there in 1980.

A visit to Yantian, one of Shenzhen's two ports, brings home the scale of China's trade. Its 40 cranes can load one container every two minutes, up to 1,200 an hour.

"We never stop," says general manager Kenneth Tse, who radiates energy and wears a navy silk tie scattered with golden currency symbols. Construction is going on to double Yantian's capacity by end-2004.

Hong Kong remains the biggest container port in the world - also thanks to China's trade.

But nine-year old Yantian handled the same amount of goods last year as Felixstowe, the UK's biggest container terminal.

Farmers turn factory hands

How has the Delta achieved such rapid growth? And can it keep going?

map of China's Guangdon region
Cheap labour is one answer. "Basically what you have to pay somebody to be an assembly line worker is what is costs to get them off the farm," says Prof Michael Enright of Hong Kong University.

Real wages have been static for a decade, but there is no shortage of workers. Everywhere, blue blouses hang drying outside factory dormitories, home to 20 million migrants.

Manufacturers now come here to be near their suppliers and buyers, not because of the tax breaks that fuelled early growth.

"What we see developing in the PRD is basically quite a deep economy," says Prof Enright.

Factory clusters

The sheer concentration of suppliers is certainly one reason Mr Tsuei stuffs his shopping trolley here.

Americans...should feel thankful to us because we're producing low priced goods they can benefit from
Guangdong provincial official

"Many retailers worry about buying the right thing, then they worry about buying enough of it," he says. At Wal-Mart "we worry about buying enough".

"Enough" for him means $12bn (7.2bn) this year, roughly 10% of the $116bn trade deficit the US clocked up with China in the 12 months to July.

Vast amounts of what the world wears comes from here - clothing, footwear, watches, jewellery. In 2001, two thirds of shoes imported to the US came from China, says the World Trade Organisation.

But China's exports are getting increasingly hi-tech, something that makes its critics nervous. A fifth of Guangdong's industrial output is now consumer electronics. It is the biggest sector, worth 4.3bn yuan ($500m).

One reason is investment from foreign electronics and telecoms giants like Nokia, IBM, Phillips and Siemens.

Foreign firms investing in China do so partly to tap its growing consumer market, but overwhelmingly to produce for export, according to Morgan Stanley chief economist Stephen Roach.

Blame game

He thinks tirades against China's cheap exports are scapegoating it for the problems of the world economy.

Chinese officials think so too.

"We don't understand why Americans are complaining about us. They should feel thankful to us because we're producing low priced goods they can benefit from," says Chen Weilin, the Guangdong province official in charge of IT development.

China's State Council has come up with a plan to double the region's growth, giving the go-ahead to a huge bridge linking the western side of the Pearl River with Hong Kong.

Beach cafe near Shenzhen
Shenzhen's middle class has the highest standard of living in China

The idea is to bring the west shore within a three hour car drive of Hong Kong, its international airport, foreign investors and financiers and pump it up into another Shenzhen.

It should also speed the integration of Hong Kong, a city which is struggling economically after decades of viewing mainlanders as poor relations.

Wal-Mart's procurement strategy offers a snapshot of the shifting industrial balance. It buys food and trinkets in Europe - gold chains in Italy, olive oil in Spain, wine in France.

And what does Wal-Mart buy in Britain? "Almost nothing - except stores!" laughs Mr Tsuei.




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