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Stories ‘Made in China’ in 2007

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Renita Jablonski: If I asked you to play a little word association game, I’m wondering what you’d shout at the radio when I say “China in 2007.” Tainted toothpaste or toys? Maybe environmental concerns? A bubble waiting to burst? The list of possibilities is pretty interesting as mounting criticism comes with new economic clout.

Scott Tong is with us now from Marketplace’s bureau in Shanghai. How would you, Scott, describe this year for China?

Scott Tong: It’s just been an amazing story of how China has been growing and growing faster than most people have imagined. A couple of main engines that have been driving China — and one of them is something I see every time I look out my window at home — I look at and I see a crane in every direction. And that is that China is just building domestically like crazy. It’s kind of like post-war America. The other part is, of course, the part Americans know well, the factory to the world. And the hero of that is the woman who works in a factory for 50 cents an hour, making textiles, making clothes — everything that’s under our Christmas tree.

Jablonski: As China gets bigger, a big part of today’s global economic story is what China is doing to prices. What’s the easiest way to explain what’s happening there?

Tong: I think we can divide it up into two things. One is China pushes up the price of everything it buys. So all of what the economists call inputs that China has to buy commodities, China’s pushing the price up of all those things. The other side of it is China pushes down the price of everything it sells. Unfortunately for consumers, that party is kind of over. There’s a lot of talk that we’ve now hit the era of rising costs in China. Labor costs are going up, raw materials are going up, the Chinese currency is going up. So the China price that a lot of people in the business world talk about, that’s starting to go up.

Jablonski: And at the same time, China is doing some aggressive shopping around the world when it comes to making investments in some pretty big places — Merrill, African energy firms, even mining companies in Australia.

Tong: China’s sitting on more than a trillion U.S. dollars in foreign currency reserves. So one stated policy of the government is to take this money and get better returns on it. And so that’s what’s behind some investments in these big financial firms. And the other part of it is these resources that China doesn’t have that it still needs, so it’s buying stakes in mines. So what a lot of people say is, you know, that China’s newest export is capital.

Jablonski: With all of that capital comes more power and influence. How is China playing that?

Tong: Well, the International Monetary Fund says with all the problems in the global economy, China and India are now the principal engines of growth in the global economy. As far as responsibility, we’ve all seen the headlines as far as the product quality. And here you have a few things that could really change the China story. Number one is if the reputation of “Made in China” really takes more of a beating, more manufacturers are going to say, “You know what? I’m going demand that my factory moves out of China, ’cause I don’t want that ‘Made in China’ label on my stuff anymore.”

The other part of the China story that that could change is if the world really thinks Made in China means lousy stuff, then as China tries to move up the value chain and create cars and auto parts and things that are higher margin, higher profit, that could really slow down. So a lot of question marks going forward for 2008.

Jablonski: Well Scott, we look forward to more of your observations. Scott Tong is our correspondent in Marketplace’s Shanghai bureau. Thanks so much, Scott. Happy new year.

Tong: You’re welcome, Renita. Happy new year!

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