 "Photo: Tina Hogue")
China went from an impoverished country to a global economic power in a shorter span than any other nation, a global investment executive said Monday.
Robert Hormats, vice president of Goldman Sachs (International), said the country's economy has helped the U.S. and warned that hostility toward China's wealth could produce consequences. He offered his insights during a talk at the Etter-Harbin Alumni Center.
China has become one of the leading economic powers in the world, ranking fourth in gross domestic product in 2006, according to the CIA World Factbook.
"If we start blaming all of our competitive problems on China and India or other countries, then we are going to distract ourselves in this country from dealing with the fundamental issues that we have to deal with," Hormats said.
Hormats applauded China's quick growth and said that more than 300 million people have profited from it.
However, Hormats said that with China's gain come many internal challenges, including environmental problems, inflation, corruption, a large gap in wealth and a high dependence on energy from the rest of the world.
Hormats added that China has become such a powerhouse because it expanded its economy by inviting investment from many foreign countries, helping it become the biggest recipient of foreign capital in the world.
He said that not only is China a large buyer of goods, but is an even bigger exporter of them.
"[The U.S. is] facing a [Chinese] economy that can compete across the board," he said.
He also said that 60 percent of Chinese exports are from American companies that invest there.
Hormats described China as the "hub of the supply chain" because it gets raw goods from other places, produces them in China, ships out the products and lets foreign investors do the same.
He added that China doesn't have the costs that the U.S. or Western Europe has, such as health care or corporate benefits.
"China is, in a way, starting from scratch," he said.
Despite popular American thought, U.S. manufacturing has reached its highest level, Hormats said. The difference now is that new technology allows the U.S. to produce more with fewer workers, he said
China would not jeopardize the U.S. economy, as it has $800 billion invested in it, Hormats said.
"They do not have an interest in the dollar going down," he said. "They don't have an interest in weakening the American economy. They have every interest in seeing that we have the stable economy."
He said ties could sour if the U.S. starts regulating what China can buy. Hormats added that a great deal of friction could arise if bitterness over China's growing economy becomes a prominent topic of discussion during this U.S. presidential campaign period.
Journalism professor Tracy Dahlby, who was a journalist in Asia for 13 years, said that the effects of China on the country's future are "panoramic."
China has risen as a competitor but also as a means of cooperation, Dahlby said.
"China owns a large portion of our debt, so that means really we are kind of joined at the hip," Dahlby said.
Dahlby said the U.S. needs to look at the long-term approach and maintain partnership with China.
"I think that there are two areas in the world that have emerged as challenges for us, meaning we need to know as much about them as we can," he said.
Hormats was the third guest in the East Asia speaker series presented by the Center for East Asian studies, the LBJ School of Public Affairs and the Center for International Business Education and Research.
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