People in the United States know a lot about China — or at least think they do, says a businessman who studies the Asian giant’s economy and politics.
Karl Schamotta, senior market strategist for Western Union Business Solutions, spoke Monday to students at the University of Akron’s College of Business Administration as the keynote speaker for the university’s China Week program. He is a foreign exchange expert and called his talk, There Be Dragons: China’s Rise — Risk and Opportunity.
Schamotta spoke with the Beacon Journal prior to the university event. The title of his talk refers to ancient mapmakers who put “There Be Dragons” on their maps to say that unexplored places were unknown and dangerous. In some sense that fear applies to China now, Schamotta said.
People need to remember that the early explorers who ignored the map warnings accrued many personal benefits while also helping mankind with their discoveries, he said.
“You have to make an intellectual journey. You have to open your mind to other things,” Schamotta said.
And that includes challenging perceptions and learning the misconceptions about China, he said.
“The biggest misconception out there is [China] growth is unlimited,” he said.
The world is seeing a slowdown in Chinese growth now, in part from a deliberate rebalancing of the Chinese economy, Schamotta said. As a result, exports from China are falling and imports are rising, he said.
Chinese wages continue to rise, as do costs, he said.
The last three decades, China was changing the world, Schamotta said. Now the world is changing China — and the nation might become more like the United States, he said.
China’s top leaders are trying to avoid the scenario that happened in Russia, where reforms led to wealth accumulating at the very top of the population, he said.
“The mood in China is, we want to avoid that mistake,” he said.
Many people in the United States think that China owns between 20 and 30 percent of the $16 trillion in U.S. debt and could cause a disaster if China decided to sell its holdings, Schamotta said. China actually owns between 6 percent and 7 percent of U.S. debt, he said. Selling that debt would hurt China’s own currency and “destroy” its exports, he said.
“The Federal Reserve has purchased more debt in the last two years than China overall,” he said.
China also faces demographic challenges as its population ages, Schamotta said.
“By 2025, India’s working population will be larger than China’s,” he said.
As a result, the Chinese are taking steps to make their current workforce more productive, he said. For example, the Taiwan-based company Foxconn — which makes Apple products and has been in the news because of serious labor unrest at a China factory — will be making large investments in robot technology over the next 10 years, he said.
“You have [labor] costs rising in China. You have costs dropping in the United States,” he said. “You have a narrowing cost differential between the U.S. and China.”
As a result, U.S. manufacturers have started creating some jobs here rather than in China. Many of the new U.S. jobs will not be able to be re-created in China, Schamotta said.
Jim Mackinnon can be reached at 330-996-3544 or firstname.lastname@example.org.