Hi, can China dominate US economy?

Is the Chinese consumer going to buy everybody out of this mess, hence rebalancing global imbalances?

Depends on your definition of "dominate" but I'd say the answer is "no".I'm sure the Chinese economy will become larger than the US economy in about 15-30 years. But by the size definition, we would say that "the US dominates the French economy", which is ludicrous.If dominate means control, then it comes down to the US having no option but to buy essential goods from the Chinese. Will the Chinese ever produce anything essential to the US that no one else in the world can produce? Of this I am skeptical. At best the Chinese will/do have high market-share through lower prices but the Chinese will be unable to convert that into domination because any attempt to force higher prices or conditions will result in manufacturing shifting to Southeast Asia, Africa, or Latin America (I bet that even some Chinese firms with outsource to these other countries).There was an interesting analysis of the "Made in China" iPod recently. At first glance, about $150 of the $300 retail price of the device went to China and seemed to confirm the worst fears that China dominates. But if you looked deeper, only $4 was actually earned by the Chinese. Over 97% of the money that "went to China" really ended in the pockets of Apple and a network of Japanese, Korean, and US suppliers. Even when it looks like the US is getting all it's goods from China, it's not.

But have you heard ACER's market covering rate is greater than Dell's market covering rate? Have you heard Volvo's major owner will be a Chinese firm?Right now most of firms in China play a production role. They do not have their own brand names. Soon or later, once they control marketing channels, many things will happen. I suspect Chinese banks will buy some big American banks in the next decade.

Quote I suspect Chinese banks will buy some big American banks in the next decade. thats not much of a prediction. the surprise would be if they didn't.

QuoteOriginally posted by: daveangelQuote I suspect Chinese banks will buy some big American banks in the next decade. thats not much of a prediction. the surprise would be if they didn't.Exactly!I remember when Japan was going to dominate the US economy in the 1980s. The Japanese had the biggest banks in the world, bought all manner of US assets, and scared the yokels half to death. In the end, though, the Japanese bought high and sold low on their US assets. Time wil tell if Volvo's Chinese owners make money on the deal.I think China will go the way of Japan. Actually, I don't think they will be as successful (per capita) as Japan. Although the Chinese government seems as efficient/effective as the Japanese government, the Chinese business culture seems too corrupt and untrusting/trustworthy to create a real low-friction, high-performance economy. Moreover, the Chinese lack of respect for intellectual property will be their real Achilles heel. The future will depend far more on IP investments than on factories or even on market channels, and I doubt the Chinese will make sufficient IP investments because their personal experience will be that IP isn't a good investment.ACER may sell more stuff, but they sell commodity products at commodity prices which will never provide the basis for true market domination. ACER's gross margins are only 10% compared to Dell's 18% and Apple's 36%.But none of that is the real issue, which is much deeper. We are past the time of empires. Money, brains, products, and services are simply far too mobile for any country to "dominate." Domination only works when your subjects have no alternative but to buy from you. Given that China (and every other country) will always be a minority of the global economy, no one can really dominate.

ACER does not sell commodity. Its Bloomberg ticker is ACERIF US Equity. ACER is a computer production firm.

In this context "commodity" means generic, indistinguishable from other products with the same function. Off-the shelf components, not necessarily poor quality, but not tops.So where Dell and Apple have build brands and command a premium (gross margins of 18% and 36% as Traden said), Acer would seem to be a low-cost, tolerably decent device without the differentiation, perceived cachet, or added value of (customer service, unique features, "Intel Inside", cool logo, custom apps., etc)See here for the economic definition:Commodity - Wiki

Trackstar is exactly right. ACER makes a commodity product in the broader sense term. There's nothing wrong with that, but it's no basis for domination.If you look at who really dominates the PC industry, it's Intel (55% gross margin) and Microsoft (79% gross margin).These are the companies that China would need to emulate -- creating something that everyone in the world wants and no one else in the world can make. Note that I said emulate and not copy. Creating a home-grown chip company and operating system company won't do it unless the Chinese version is vastly superior (and more trustworthy) than the current options. Even then, a Chinese Intel and Chinese Microsoft may not mean much due to broader technology trends. The presentations I've seen from Intel suggest that even Intel knows that CPUs are becoming a commodity business. And Google/cloud computing is trying to make the operating system irrelevant so being a Microsoft may not mean much in the future.

So to round out a tech discussion with "The Four Horsemen of the Apocalyse" you have Sun, EMC, Cisco and Oracle. We could write a book about the trials and tribulations of Sun. Unless someone is deep in IT, you would not even know if you have Cisco gear in your network or EMC in the datacenter (and yet are their products and solutions fully commoditized?). Oracle, well what can you say, Larry Ellison is a man of very strong will.The story that we discussed awhile back on the Debt and Equity thread ties in here. Short piece on IBM and Global Services. ( In December 2004, IBM sold its personal computer business to Lenovo for $1.75 billion as part of a big bet on enterprise services and consulting).When Lenovo bought IBM's PC division, they certainly had brand in mind. But that brand had suffered some erosion over the years for several reasons, but maybe most crippling - customer service and time to deliver (!). I bought Dell instead of IBM way back when, because Dell could deliver my goods in *5 days* and IBM was going to take *6 weeks*. Then you check the price point and say, what have I got to lose... Dell has had my business ever since. ***Anyway, this is a digression, but the commoditization conversation is quite interesting in tech. Quick search revealed they have not fixed the problems: Example of customer service problem with Lenovo-IBM And in case you are wondering, that is not the path to Total World Domination...

QuoteOriginally posted by: JACER does not sell commodity. Its Bloomberg ticker is ACERIF US Equity. ACER is a computer production firm.lost in translation.

Is ACER a Chinese company in an usual sense?I mean that it is a Taiwanese company: Acer management

QuoteOriginally posted by: yurakmIs ACER a Chinese company in an usual sense?I mean that it is a Taiwanese company: Acer managementOnly in Beijing's imperialistic dreams.

I don't think China will dominate US economically. China flooded the markets with low quality products. It will take for example one good PR campaign in US to make sure that nobody besides illegal immigrants who don't read English will buy toys produced in China, because their toys are made from poisonous materials. The only reason why it did not happen so far is because nobody wants to compete with them for toy's market.

The Treasury released the international capital data yesterday. It spawned a lot of chatter about the Chinese government starting to dump US bonds. My belief is that this--in the short term--not a realistic scenario. Given the country's large current account surplus and its committment to pegging the Yuan to the dollar I don't believe they have any real alternative. What are your thoughts? Do you think the pundits are overreacting?