As the world scrambles to lock in resources for its people’s future and security can we afford to ignore the developing world and its economies, most namely China?
In an economic climate where raw material prices are skyrocketing, many ignore China’s rapid economic development which enables them to soak up all the natural resources it can get which contributes to an increase in price.
This is for a few reasons that we must take into account.
First China has over 1 billion people living in their country many whom are working to produce goods which we then buy back from them. In order for them to make those goods they buy the material from us and sell it back to us. Amazingly they can purchase the material, make the product, and sell it back to us for a profit.
As a matter of fact right now the only reason many companies here make any money at all is because they can purchase their items from China and mark it up for a profit.
One may note that a sizable number of eBay sellers earn part or all of their income by purchasing their items from China direct from wholesalers, suppliers, and manufacturers.
Next we must consider that China has a surging economy, they now have an expanding middle class. Their society is changing as such that the farmer who used to wash his clothes by hand, now has a job in a factory earning what he/she would consider a good wage. This enables the worker to live a middle class lifestyle and have a washer, dryer, TV set etc. It only makes perfect sense, give someone a good job that let’s them have a disposable income and they will put it to good use.
The same things can be said of India because they are also experiencing a great boom in their economy. India too has a population of over 1 billion people, which it must sustain and provide for. However the dynamics of their economy are different which we will discuss further another time. While manufacturing and other blue collar jobs are outsourced to China, many white collar jobs are outsourced to India.
In short China makes the goods, India provides the human resources for office, information technology, call centers, etc and we are the consumers feeding both their economic machines, including our own.
We accomplish this as we buy products from China, American companies profit because of the low cost of manufacturing, and we purchase these goods because of their low cost.
Therefore the more we purchase, the further we contribute to all three of our economies, which makes raw materials increase in price and leads us to the conclusion that we cannot afford to ignore China anymore and its effects on a global scale. Nor must we be so afraid that we hurt our economy by buying items that are made in china. I say this because buying from China can have a positive effect on our economy which we will discuss in another upcoming article which steps back and looks at the global economy as well as our own.