China’s lesser role as global force

by Morton Sosland
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When it comes to assessing global prospects for food manufacturing, China almost always is assigned a central growth leadership role even though its importance in the arena for the present is limited. Based on its overwhelming population as well as its striving to bolster its domestic food supply and gaining an important role in expanding international markets, China seems almost sure of occupying a foremost position in food manufacturing serving its home consumers and responding to demand from abroad.

Possibilities in foreign marketing are enhanced because of the way Beijing has focused on developing countries for its major investment targets. Nations in the Middle East and in Africa that largely have been avoided in foreign investing by the United States and also European countries have been made the favored locales for outright capital investing by both the Chinese government and Chinese companies seeking to expand outside the home country. Many of the nations do not have the stable governments that might be expected in places where new plants and new technologies are being financed. At the same time, they are viewed as sizable import markets for processed foods.

In looking at the consequences of U.S. capital spending in overseas markets, there is little or no relationship to the development of demand for processed food. Even without this direct relationship, the American food industry has pursued growth overseas that matches and even exceeds the progress that is being enjoyed in spending on new technology. Of considerable importance is the way America has maintained and even extended its lead in global capital spending for research and development and for new equipment and new plants. This progress appears to be in the face of earlier forecasts that China, reflecting its size and demand potential and its governmental focus, would somehow become leader of the global economy. Looming large in such assessments were the power of state-owned enterprises and the rapid growth of independent companies in China that have impressed with their ability to raise unprecedented amounts of capital. Much of the same strength was attributed to expanding Chinese food companies that sought positions suited to worldwide expansion.

As Chinese business growth has slowed in recent months, reflected in part by chaotic fluctuations in stock markets based in China, the likelihood of China surpassing the United States in economic activity appears increasingly small. Lacking in China are the forces that make America such a power in international business. That list, as compiled in a recent article in Foreign Affairs, include the restless competitiveness of U.S. culture, the political influence of U.S. corporations, the research productivity of U.S. universities and government laboratories, the U.S. financial system favoring investment in new technologies, immigration systems that bring in new talent, laws and tax codes favoring entrepreneurial activity, America’s role as the sole superpower, and the dollar’s strength as the global reserve currency. Largely on the other side in China’s favor are its stance as a rising power on the march, led by clear-headed planners and clever strategists.

Hardly anything is more central to the way that China develops as an economic powerhouse than the way in which other countries react to its new eminence. The many interpretations that were given to China’s brief period as the major buyer of a number of raw materials, its lead position in absorbing crude oil and its huge takings of other materials where prices all tended to soar at China’s initial appearance. While continuing as an important buyer in some food-related markets, even there China is much less of a force than forecast not very long ago. The country’s role as a competitive provider in global food markets also has diminished.

Instead of prompting a new bullish underlying trend for these markets, as initially projected by many economists, the result has been a sharp increase for many of these items on the supply side and plunging prices to establish near-term lows. China’s role comes very near to being a bust.

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