By Samuel Peña Guzman
Foreign Investment Coordinator
State of Nuevo Leon

I am more surprised every day by the dynamism of the Popular Republic of China and the incongruent actions by the US Government. Nowadays, everybody acknowledges China as the next economic power to emerge in this century, which, maybe not soon, but undoubtedly in the next few decades will surpass US economic power.

Even if it is true that our north neighbor is nowadays the largest economic power in the world, the current American administration has implemented several economic and public policies that have not yielded the expected results. This has made the economic recession suffered in the USA to last even longer, strengthening China´s power in detriment of the US power.

There is no doubt that the funds used by the US Government for the war against terrorism, the invasion to Iraq, defense expenses and also the incoherent and absurd policy to cut taxes to the highest income, have been some of the factors that have contributed to increase US deficit that now amounts to almost one trillion Dollars. On the other hand, the Bush administration mistakenly believed that the tax cut would generate more jobs due to capital re-investment. Not only did capital was not re-invested, some flew abroad for expansions and/or foreign investments by American companies, let alone the fact that a significant percentage of these capitals was used for investments made in China.

In addition to this, China is the second goods and services exporter to the USA. Our neighbor country has a trade deficit in foreign trade of around US$120 Billion, which is undoubtedly a " time bomb" because not only does it puts at risk the economic balance in the USA, but also the world´s currency system.
It is quite interesting to observe the relationship between China and the USA. It is clear enough to me that China has an authoritarian regime controlled by the Communist Party; on the other hand, the USA has been one of the main promoters of the changes in China´s political and economic system, that even if it could suffer an economic setback over the years, this would not be the case with its ruling political system.

Both, the economic growth and its interaction with the outside world, have fostered the development of a " new" Chinese middle class, that even if it has been exerting pressure for a larger capitalism, democracy and peace, results have not been as expected. In spite that China has become a more prosperous country, economic reforms have not reached political reforms. There is no doubt that economic liberalization has allowed for the emergence of a new middle class, which demands are of a capitalistic nature – common in the western world – such as protection to private property, access to information without government restrictions, and more political expression freedom. This new class has failed to exert
enough pressure for a substantial political change in the government. On the other hand, Chinese authorities have capitalized the country´s economic success not only to legitimize their authority, but also to minimize the political and institutional changes required to reassure that markets will work without problems and economic reforms yield positive results, contrary to US economic policies that have not yielded positive results.

Even if the USA was the main sponsor to accept China in the World Trade Organization (WTO) - and Mexico was the main opponent - American companies have been among the most damaged by markets opening in China, mainly in the manufacturing field that has been affected causing large unemployment that adds to a jobs deficit that the Bush administration has been unable to tackle by creating enough jobs, not to mention the factors of the economic recession they are experiencing.

While China grows at an immeasurable speed in economic and non-political issues, the USA is not only contributing to the Asian Giant´s growth, but Chinese are growing in detriment of Americans themselves, and many developing countries are paying their toll on this, because day after day we loose competitiveness before the Popular Republic of China.

It is surprising to see our north neighbors increase their trade links – at their own expense – with the Asian Dragon and foster a substantial economic growth, while the USA and many developing countries, such as Mexico, loose competitiveness before the Asian Giant. However, this may bring a better world balance, not depending almost exclusively on the American economy. I think it is healthy even though, as any medicine, it may be sour, in addition to the costs and collateral damage which Mexico will no doubt share.