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Woodward's visit to China "eye opening"


Dr. Douglas Woodward, professor of economics and director of the Moore School's Division of Research, traveled to China in January as part of a Center for International Business Education and Research (CIBER) event sponsored through the University of Colorado-Denver and the University of Wisconsin-Madison. (The Moore School also hosts a CIBER office, funded through the U.S. Department of Education.) Woodward last visited China five years ago. His recent visit provided an opportunity to see first-hand the profound change and economic growth that has taken place in China.


Q.  Contrast what you saw during your recent visit to China with your visit five years ago.

The first thing that strikes you is that airports that were old and grimy five years ago are the opposite now-Guangzhou, for example, a major city in the south of China, has a brand new airport, and not just thrown together, it's esthetically pleasing, meant to give a very positive image of China. There are new highway systems being built all over; they are rapidly moving into the automobile age. Of course there is a concern from the perspective of pollution and global warming.

Another example is the incredible growth around Shanghai. The Pudong area across the river from the main city was formerly the site of rice fields and small-scale factories. Now it is a business center that rivals any in the world. It's astounding. There are so many buildings going up, it's imposing-one skyscraper after another, all filled with tenants and very sophisticated.

China's building boom has benefited from a great deal of private investment, much of it from elsewhere in Asia-including Taiwan. There seems to be a competition to see who can build the tallest buildings in the world. The developers bring in top architects from around the world, and you see some really jaw-dropping architecture already in place. Beyond the glitzy skyscrapers, there are many problems in China, of course-for example, housing. In the major cities people are crowded into small apartments. But the quality of life has improved for the average Chinese. There's a rapidly growing middle class that can afford detached, single-family homes, which you see rising across the landscape outside the city centers.

Q.     What were your impressions of the educational system there?

We visited a number of universities, meeting with top business school faculty and leading researchers. This was the most "eye-opening" experience for me. China is rapidly gaining ground in higher education. The most remarkable example is a university city being built near Guangzhou in the southern part of the country. The government took over a whole island to build a series of campuses, which will eventually accommodate 500,000 students. In three years time, much of this massive project is completed and students are attending classes. The students we talked with seemed to be to be thrilled to have an opportunity to get a college degree. The desire to learn is incredible. For example, on Friday nights the students do not party, they hold debates, honing their rhetorical skills in English. You get a sense there is a different attitude toward education.

The Chinese seem to have a national consensus about economic development and education... they are putting the resources behind it.

Q.     What are the implications for our economy and competitiveness given the rapid economic growth in China?

The Chinese are able to pursue big infrastructure projects much more quickly than we are in the United States. It could be said that they have the "ultimate eminent domain"- the government owns all the land. So they can transform large areas quickly. Along with education, they are vastly improving their infrastructure--with new highways, mass transit, and ports. The Pearl River Delta around Hong Kong and Guangzhou, where millions of people work, has several of the largest ports in the world, serving their manufacturing exports. Our trade imbalance can be seen in action here. The Chinese load containers of goods and ship them to North America. These containers come back essentially empty, except for some agricultural products we trade in China. The huge Chinese trade surplus helps fuel income growth and fund infrastructure improvements. We help keep this process going every time we shop at Wal-Mart.

There's really nothing "unfair" about the U.S. trade deficit with China. Ultimately, they are competitive in manufacturing because they are so productive. There's no question that they have low wages, but so do many countries. The Chinese have low wages and very high productivity.

As China grows there will be a growing demand for American products. They certainly want our more sophisticated products- the Boeing Dreamliner, for example, part of which is being made in the Charleston area. Besides sophisticated manufacturing, the U.S. is competitive in finance and agriculture. That's our comparative advantage, as we say in economics. The internal market is now opening for U.S. financial institutions, which are rapidly expanding. There is a huge Chinese demand for farm exports like cotton and soybeans. There's no question that there will be opportunity for other products and services as the Chinese consumer market matures.

We need to understand where we can be competitive. Thus, it is good that our state (South Carolina) is focused strategically on China, with an office in Shanghai. South Carolina is one of few states to have an economic development office in China, so we are recognizing the importance of China in our economic development. We can benefit as China emerges as an outward investor. The Chinese company, Haier, located in Camden, South Carolina, is one of the first Chinese companies to create an international brand (ranked 1st among China's Top 10 Global Brands in 2005 by Financial Times).

Q.     How does what you have seen and learned in China influence your teaching, research, and presentations to business leaders?

I teach about global competitiveness and economic development, and you can't teach that subject without being up-to-speed on China. I also make presentations to business groups, and many want to understand the U.S. competitive position relative to China, including the trade deficit. After my trip, I really understand the challenges we face much better.

The trip also helped advance my research, which primarily is focused on economic development in Africa. Along with Professor Rob Rolfe in International Business, I have begun writing about China's rapidly expanding influence in Africa-something that is not well-known in the United States. China is emerging as a major economic superpower and outward investor. Chinese multinational companies are now investing across the continent and spreading into markets that have been neglected by Western companies. In 2006, China held a huge summit with African leaders. It offers an alternative model of economic development that is attracting a lot of attention in Africa. From the Chinese perspective there is a huge demand for African resources, notably oil and gas. In turn, China is going into countries such as Sudan and Zimbabwe where the U.S. has sanctions.

In the end, the main thing I learned from the trip to China-and which I will emphasize in class and in presentations-is that this country will be an economic force to be reckoned with throughout the rest of this century. To be sure, there will be constraints on China's continued growth-limited resources and significant environmental costs, for example. But overall it is a successful model, one that is different from the West. It's been rapidly expanding for 25 years. By the end of this century, they may well be the dominant economic power in the world.

- Gail Crouch
July 2007