Is China Japan all over again?
In the 1980s, Japan was the bigfoot rival to the US economy. But this Asian giant is different.
Chinese firms failed in their bids to buy Unocal and Maytag this summer. But that's barely diminished the anxious warnings from Washington. Indeed, as China's economy grows, it's easy to think the 1980s are back.Skip to next paragraph
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That's when Japan's economic "miracle" threatened the US, prompting an intense backlash as companies like Toyota and Subaru, Matsushita, and Sony grabbed growing shares of industries at the heart of US identity: cars, steel, and consumer electronics.
Now the ominous warnings are resurfacing - with China cast as the villain.
As concerns grow that a new Asian giant is intent on challenging the US in everything from sedans to software, the Japan experience of the '80s may provide insights on how the US and China might compete - and coexist - in the global economy of the 21st century.
On one level, say analysts, China is not as much of a threat as it is often portrayed to be. It has decades to go to match the high-tech and management prowess of the US - unlike Japan 20 years ago. Another critical difference is that Beijing has welcomed foreign investment and companies. That's something that Tokyo was (and still is) loath to do. China's total exports and imports accounted for 75 percent of GDP in 2004, for example; the figure for Japan is about 25 percent. And China, thus far, hasn't bid for such American icons as Rockefeller Center, though it clearly has set its eye on greater investment in the US.
In many respects, China's challenge to US economic and strategic influence is only beginning to take form. True, its growth - officially 9 percent annually since embracing market reforms a quarter-century ago - is impressive. And the country is boosting the skills of at the high end of its labor force - churning out more PhDs and building engineering schools - even as its huge reserves of low-wage workers ensure its status as "factory of the world."
"China, with its supply of cheap labor and high levels of education, will continue to be a very big challenge, one that's unlikely to level off as quickly as Japan," says Ezra Vogel, a professor at Harvard University and an expert on China and Japan. But he adds, "While there will be a lot of Americans frightened at a growing China, if we have skillful political managers, there's no reason we can't get along."
China's rise certainly bears similarities to that of Japan. It's easy to forget that Japan once battled with the US over textile exports. Both Asian nations have pursued export-driven growth and focused on developing "strategic industries" like autos and electronics. Like China now, Japan once faced pressure to strengthen its currency to help reduce a monumental trade deficit with the US.
But while there are trade barriers that contribute to that deficit, there's no question the Chinese economy is more open to outsiders than Japan's. China has set up joint ventures as a way to leapfrog development in cars, for example. Foreign direct investment hit nearly $55 billion last year, compared with Japan's $8 billion.
As a result, corporate America today is solidly behind China. American business was solidly antagonistic toward Japan - a result of battles for the right to sell everything from apples to autos in its markets.