2010-12-31

Why we all need to learn Chinese

I had to write a short essay about an emerging issue in US-China relations and what I think should be done about it. I figured I'd post it here too. Short story: we all need to learn Chinese.

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The next 10 years will see the beginning of the end of the US' "free lunch".  As the standard of living continues to improve in China and as economic reform and access to information continues to spur growth, wages and prices will rise, which will cause an increase in the cost of goods manufactured in China, and much of this cost increase will be passed on to the American consumer. The increase in the cost of consumer goods may make continuing to import goods from China unsustainable for some industries. Unfortunately the US has already lost (or never developed) the ability to manufacture certain goods and materials in quantity, and has long relied on cheap manufacturing in Chinese factories. Chinese economic growth is therefore likely to cause tensions between China and the US.

Meanwhile China has started investing heavily in outsourcing cheap manufacturing to Africa and other developing regions, so it is likely that China will emerge as the next super-consumer country, and with an emerging middle-class and much greater purchasing power than the US (and maintaining trillions of dollars of US debt), the rise of China will likely drag the US into economic doldrums.

The traditional business and economic approaches to address this problem will all of course be pursued (investing in emerging Chinese markets, exporting Western brands to China and/or developing multinational business conglomerates).  However I think to truly stay relevant, the US needs to focus on teaching Chinese language and culture to every school student the way that every Chinese school student is taught English language and culture, and the US government needs to focus on setting up an extensive network of student exchange programs with China and other Chinese-speaking countries.  By exposing school children to Chinese language and culture, the next generation of business leaders, political leaders, scientists and engineers will be enabled to work alongside Chinese counterparts rather than simply competing against them while the economics of scale turn in China's favor.

4 comments:

  1. This is a very interesting perspective Luke, and I have a gut feeling it's a likely scenario. Do you think there is any chance of the US re-creating/re-inventing its manufacturing industry or do you feel it's too late for that? You've got me wondering what might be the Western Brands to export to China, where to start?

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  2. Thanks for the comment -- I don't think it's too late for the US but the education system has to be fixed first :( There are a few US brands exported to China already (Intel chips, for example, as well as I'm sure Cisco routers etc.) -- tech would be a good place to start.

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  3. I agree that Americans need to work harder at teaching foreign languages, but we all need to learn Chinese? What about those other couple of billion non-Chinese speakers. Maybe French, Russian, Spanish, Arabic and Farsi might come in handy too.

    The Chinese have become the number one manufacturer in the world, but their customer base is not infinite and they are desperately short of many resources. Before they can take over the world as you seem to believe, they will have to get a handle on corrupt banks and local officials, develop a currency that can be traded internationally, and lift their own population at least above the world's average per capita income.

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  4. Bruce -- good points. However all the problems you comment on are being resolved at faster rates than anybody could have predicted even a decade ago. The attempt to internationalize the RMB as a reserve currency will probably be largely successful within the next few years. Fiscal corruption is not as big a problem as political corruption in China, and the sort of thing we would call manufacturing corruption but the Chinese simply think of as "cutting corners", "creatively disposing of waste" and "imitation being the sincerest form of flattery". However the global market has little tolerance of these behaviors, as illustrated by Apple being forced to audit its Foxconn operations, so I think we'll see a maturing in these areas soon too.

    The thing that is the most remarkable in China right now is the increased awareness among the Chinese that they no long need offer deference to the government as a paternalistic figure, people are starting to realize they live and thrive and succeed on the back of their own actions, not due to the goodwill and blessings bestowed upon them by the state. I think a lot of things are going to continue to change quickly.

    Yes, there are a lot of other languages out there spoken by a lot of people, and if you want to learn a language understood by a larger fraction of the world's population, you probably should learn French, Russian, Spanish or Arabic. But Chinese offers a chance to make it big, with unprecedented economies of scale (assuming you have the "guanxi" to make it happen) that is provided by none of the other languages.

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