Globalization & China: The Disappointed Investors

I read during my flight out of Seoul, Newsweek’s very insightful article on how may global enterprises are forced to hedge their bets on china following massive investments and suffering extremely poor returns. A must read for all talking about the rise of china – to understand the nature of growth and investments that are happening in china. I can confirm that I am repeatedly hearing such stories all around( my initial surprise turned into realistic assessments to a certain sense of tiredness in hearing such views repeatedly) on investments made in china in my varied interactions.
I believe that when it comes to discussing Asia – I find that amongst all western observers - Stephen Roach is clearly ahead of the pack – others look at the blistering growth here and write rosy words – Stephen does several notches better. In his latest bulletin
Stephen Roach writes that there’s nothing flat about this unbalanced global economy. The image of a “flat world” is most appropriate for the endgame of globalization, adding that ideal state is decades into the future - if that. While IT-enabled connectivity has shrunk the world in many new and important respects, the world is struggling mightily with what this connectivity has brought. China and India are reshaping the global economy as never before. The 40% of the world’s population that lives in these two countries is only just getting a taste of economic prosperity. They are pushing ahead rapidly with very different development models. China has done it the manufacturing way catering to external demand, whereas in India it’s been more of a services and internal consumption story. The theory of globalization teaches us that this is a “win-win” development. Globalization may well be win-win in the long run, but in the here and now it is profoundly asymmetrical. It has given rise to a multitude of new entrants on the supply side of the global equation but very few new consumers on the demand side. With the important exception of India, Asia remains very much an external demand story. With the rest of Asia now increasingly integrated into a China-centric supply chain, the region remains far more skewed toward US-centric external demand than internal consumption. India’s consumption-led growth dynamic is encouraging, but its per capita spending far too low. The hyper-speed of an increasingly asymmetrical globalization is hardly the stuff of a flat world. China is now looking to services, whereas India is counting on manufacturing to fill the void. The question is, Can they pull it off? I still have my doubts about India’s manufacturing strategy,( he earlier wrote, The Indian manufacturing model, continues to suffer from three major deficiencies - a lack of infrastructure, a low national saving rate (a little over 20%), and anemic inflows of foreign direct investment,given the nation’s seemingly chronic shortfalls of infrastructure, FDI, and saving. At the same time, he argues that china is relatively clueless when it comes to understanding a services culture – He concludes that globalization at this point in time is far more about disparities between nations than the assimilation of a flat world. Definitely important points to ponder.