This is not your mother's Ghina

First, I wish a belated Happy New Year to all our readers and a successful 2006 for your companies. I hope you all had time to relax with your families.

I would like to say a special thank you to all our Business Card advertisers in this issue on pages 79-81 as well as those in our sister publication. Building Products Digest. Through your generosity and our matching contribution, I am pleased to say rve have donated $3.800 to Habitat for Humanity's Gulf Coast fund. This is the second year for our charity donation. and I hope that we can continue to build on our donations each year. Thank you for your support.

In November, I had the opportunity to make my first visit to China. For most of us older ones. our thoughts of China are based on the gray days of Mao. I can report that those days are far away. First, I would say that China is a beautiful and interesting country to visit, particularly if you enjoy history. We found a great sense of curiosity and a great deal of friendliness. especially from young children, who are all learning English it seems. We rvere welcomed by everyone in the street with smiles and an earnest and energetic "hello".

On landing in Shanghai. I could not but be impressed rvith the nerv airport (which after five years is already too small. and is being doubled in size). the bullet train that speeds alongside the nerv freervay. the nerv major bridges, and on entering the city the amazing number of skyscrapers (norv 4,000 in total, twice as many as New York, and grorving weekly). most rvith beautiful architecture at their top. The skyline is full of cranes rvith many. many more buildings under construction. From the communist time warp of l0 to l5 years ago, you rvill see building and modernization that is quite extraordinary.

This was a pattern we saw in every city and every village, although with- out perhaps the same aesthetics. In particular. along the Yangtze River. tvhere a nerv canal and dam have been built. rve rvitnessed the complete relocation of cities large and small to avoid the rising rvaters that will be completed by 2009. The new power plant. rvhen fully operational. rvill provide one tenth of the entire porver needed in China. It rvas interesting to contemplate that if rve had tried to build the same project in the U.S.. rve rvould be debating it for the next 50 years rvith environmental intervention at every turn. Yet from start to finish it rvill take l8 years to complete. One-and-a-half million people are being relocated by giving them nerv homes at no cost. Horvever. on the minus side. levels of pollution appear out of control.

Everyrvhere you look there are nerv apartments. stores. bridges. roads. railrvay stations, airports. tunnels. cities. etc.. etc. You get the picture.

I have to say I came back conflicted by rvhat I sarv. On one hand. you can now get your Starbucks at the airport. and a McDonalds or KFC. and I even sarv the Wal-Mart-our gift to the east. But. rvhat I also sarv was that rve have transported our technology. our manufacturing capacity. and our machinery in an attempt to gain limited access to a 1.5 billion consumer market. It is still difficult to do in business in China rvhich. make no mistake. still has a communist government (and by the way. most people seemed happy rvith). As rve learned. you can think rvhat you like. but you do rvhat the government tells you.

The rise oI China as an economic porverhouse suggests this is the rise of a nerv dynasty. That may be hard to take seriously rvhen you still see some horrible living conditions in many places. Horvever. per capita income has tripled in the last generation. and 300 million people have been eased out of poverty. The Chinese government has seemingly also found a way to keep a tough hold on their people communist style and yet foster true western-style entrepreneurism. China norv has l0 billionaires. up from three a year ago. If you go to large cities like Shanghai and Beijing. you rvill see entrepreneurial businesses thriving like you cannot imagine.

The scary part of this for me and for everyone else in the West should be the current speed of change. China is grorving at a rate of almost l0Vc ayear. and it is estimated that it has the capability to grorv by 7-87c annually for years to come. With a trade surplus of $850 billion (compared to our 5400 billion deficit). they have the money to continue their grorvth.

While rve have already seen many of our lorv-end manufacturing businesses move to China. the country is norv moving from lorv-end. lorv-cost manufacturing to state-of-the-art manufacturing. All the major economies of the rvorld are scratching their heads as to horv they rvill compete in the future.

When the Soviet Union collapsed, I think most of us thought that the U.S. rvas the only superporver. but it is estimated that by the middle of the century China's economy rvill surpass the U.S.'s. As their porver grows. they rvill become both allies and countenveights to U.S. power at the expense of Japan and Europe. The question of rvhether lve engage them or contain them is a valid one.

The emer_eence of China should be a rvake-up call to everyone in this country. as every one of us is affected. Yes. rve may get lorv-cost. Chinesemade clothing. toys and electronics at Wal-Mart. But China is also buying large volumes of fuel and rarv materials such as concrete. steel and plastic. That increases the costs of rvhat rve manufacture and buy here. rvhich in tum rvill lead to lorver rvages. and ours becoming a service economy as we continue to lose our manufacturing base. China's mix of cheap Iabor. a huge domestic market. an emerging middle class. and their outreach for capital promotes a strong argument that they have to be targeted as an equal trading partner. not the lop-sided situation rve have today. China in particular has to go a lot farther in properly valuing its currency against the dollar. estimated at l5-4O% less than it should be.

If rve do not rvake up. rve risk becoming the nerv "Old Europe." desperately trying to slorv the march of progress in a vain effort to retain past leadership of the rvorld's economy.