Sessions with Professor Leslie Young

Sessions with Professor Leslie Young

by Team B (Mathew, Kyle, Dorothy, Emily)

As New Zealand is gradually but increasingly building economic relationships with China, it is useful for us to understand the historical and cultural evolution of Chinese economic power as we look towards the future.

Wave 1 – Ideology

The first wave of China’s attempt to increase its influence at a global level focused on the spread of communist ideology.

While the success of the aspirations was limited to progress as far as Vietnam, the resulting war had some critical consequences for the future growth of China.

China was a resource-constrained country, resulting in a reliance on labour resources. An unforeseen outcome of the Vietnam War was China’s future ability to leverage off the USA’s supply chain innovation of the container ship, and subsequent access to much needed resources.

Wave 2 – Shifting up the value chain

Leveraging off its abundant supply of labour, China enhanced its global position by providing cheap production of manufactured goods.

Moving up the value chain was achieved thanks to one of China’s historical foes, Japan.

Japan’s culture of shifting executives into less challenging roles at the age of 55 led to a shift of some of these people to China. They brought with them extensive experience as well as IP.

This influx of capability, combined with extensive central government investment, resulted in China moving up the value chain from simple assembly to component production and ultimately high-tech production.

Wave 3 – Globalisation

As China matured technologically, underlying economic structures that encouraged saving and state ownership led to a need for China to move capital offshore.

This offshore investment resulted in loans by CDB securing long term (in principle) access to resources such as oil.

As China also now 'made the machines that made the machines' (such as cranes/heavy industrial equipment), investing in infrastructure in developing countries resulted in gains flowing back to China, strengthening the reliance of these partner countries on China.

Our takeaway message is that China's increased financial outreach shows no signs of abating, so New Zealand must consider how to ride the wave.