China poised to overtake US in 2020s
(Agencies)
Updated: 2005-02-09 20:21

WASHINGTON - China's unprecedented rise, fueled by foreign investment and technology, has put the Asian giant on a path to surpass the United States economically by 2025, the author of a new book on China said on Tuesday.

U.S. pressure on Chinese authorities to revalue the yuan currency will bring only a brief respite from the fusion of cheap-but-skilled labor, imported technology and economies of scale that make China so competitive, said Oded Shenkar.

His book "The Chinese Century," represents neither a "China-bashing book" nor the 1980s "Japan as Number One genre," the Ohio State University business management professor said.

"The rise of China is a watershed," Shenkar told Reuters in an interview. "I compare it to the rise of the United States in the late 19th century."

Britain, the leading power of that era, did not take its former American colony seriously despite the geopolitical implications of the U.S. emergence. China aims to regain the world preeminence it had before the modern era, he said.

More than becoming a new Japan, "China will be overtaking the United States between 2020 and 2025," Shenkar said.

The Israeli-born researcher said he put China's emergence as the world economic power about two decades earlier than most analysts by measuring purchasing power rather than nominal figures to measure output and growth.

"I believe first of all that the Chinese economy is actually larger than the numbers would suggest," he said.

CURRENCY PRESSURE MISPLACED

Although he expects an eventual modest revaluation of China's currency, Shenkar said lobbying China to alter the yuan's decade-old peg to the dollar would not help much.

"Pressure on not only currency rates, but also tariffs and quotas will have only a temporary effect," he said, citing the case of Japan's dramatic revaluation in the late 1980s.

"What you are going to do if you revalue the currency, is lower their costs of importation," he said.

To cope with competition from China, the U.S. government must improve education in science, while American negotiators must drive harder bargains on counterfeiting, said Shenkar.

In intellectual property rights (IPR), he said, China's celebrated crackdowns on IPR never seem to put Chinese counterfeiters out of business.

A major theme of Shenkar's book is how technology transfers have helped China catch up to U.S. competitors at low cost.

"Maybe we are selling our technology too cheap, or as in the case of China, we're giving it away or somebody is taking it without compensating us," he said.

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