By Alan Wheatley
Jan 17 (Reuters) – With the British economy flat on
its back, the Jaguar Land Rover (JLR) factory in Birmingham, the
second largest city in England, is doing something unusual:
hiring. The company is doing well. With exports to China and
other big emerging economies rising strongly, Britain’s largest
automotive manufacturer recently said it would hire another
thousand workers and build a new engine plant, creating a
further 750 fifty jobs.
The Jaguar plant, which manufactured Spitfire fighter
aircraft and Lancaster bombers during World War II, is an
amalgam of state-of-the-art robots and old-fashioned craftsmen
intent on their work. Electric carts laden with parts buzz
across the factory floor, passing beneath big screens that flash
the number of cars completed that shift. It takes 48 hours to
process the top-of-the-line XJ model. As sedans roll off the
assembly line, each customer’s specifications are given a final
check, and the cars are driven away to be shipped everywhere
from Australia and Azerbaijan to the United States and China.
The company, bought by India’s Tata Motors from Ford Motor in
2008, exports 75 percent of its output. Britain and the United
States remain JLR’s biggest markets, but China has sped into the
third spot and now accounts for 14 percent of the company’s
sales, which reached 232,704 vehicles last year.
That the luxury tastes of newly rich Chinese are generating
employment in the birthplace of the industrial revolution is a
powerful expression of Asia’s rising clout and a reminder that
the West’s protracted debt crisis has not sucked all life out of
the global economy. JLR’s sales to China have risen by more than
750 percent in the past five years. “Nearly everybody’s cutting
back because of the recession, but China is still an expanding
market,” said Jim Kearns, an experienced assembly-line worker at
JLR’s Castle Bromwich plant in Birmingham. “They’ve got their
heads screwed on over there.”
Europe’s debt malaise is prompting talk of a lost decade for
the economy, like Japan in the 1990s. In the United States,
deadlocked debt reduction talks, high unemployment, and
long-stagnant incomes are sapping confidence. But many less
affluent countries, though not immune to the West’s woes, have
displayed remarkable resilience. While advanced economies are
likely to expand just 1.6 percent this year, emerging and
developing countries should notch up growth of 6.4 percent,
according to the International Monetary Fund. For the past five
years, developing countries have contributed as much as 65
percent of world growth and 70 percent of the growth in global
imports,
the World Bank estimates. Nor is this growth purely a function
of final demand in the West. South-South trade – for instance
between China and India or Brazil and Africa – now makes up 45
percent of developing country imports, up from about 23 percent
in the early 1990s.
The BRIC countries are in the vanguard of this reordering
of the world economy. Brazil, Russia, India, and China accounted
for just 8.5 percent of global GDP at market exchange rates in
the period between 2000 and 2004, according to the IMF. Between
2005 and 2009 that share rose to 13.1 percent, and by 2015 it
will have overtaken that of the euro zone to reach 20.7 percent,
just shy of the United States at 21.1 percent. “We’re in the
early days of the rise of the BRICs,” said Jim O’Neill, the
Goldman Sachs economist who coined the concept a decade ago.
Trade tells a similar story. Over the past two decades, the
share of world exports among the BRIC countries has nearly
tripled, while their share of global imports has nearly doubled.
At the same time, the gulf in productivity between industrial
and developing economies – what economists call the “convergence
gap” – remains very large. Hundreds of millions of people have
been lifted out of dire poverty thanks to the 10 percent annual
growth China has enjoyed since the late 1970s, but an estimated
300 million Chinese still do not have access to clean water.
Measured at purchasing power parity, annual income per head in
China is just 16 percent of that in the United States. In India,
the figure is just 7 percent. It’s this catch-up potential that
has businesses salivating.
“I’m still optimistic. We will continue to see hyper growth
in these markets,” said Yang Yuanqing, the chairman of Lenovo,
the world’s number two personal computer maker. In China, for
example,many people in the biggest cities already own a
computer, Yang said, but the penetration rate in smaller cities
and townships remains very low. His confidence is broadly shared
by the man in the street in China even if there is resentment
towards officials suspected of having acquired their wealth
through connections or corruption. Zhu Lijun, a postgraduate
student in Beijing, said he was satisfied with his standard of
living. “As a college student, I feel optimistic about my
future,” Zhu said. “What matters is not whether other people
get wealthy faster than me, but the way they get wealthy.”
Economic growth in China is slowing but incomes are still
rising fast; the government is committed to boosting household
consumption’s share of the economy so that growth relies less on
investment and exports. HSBC reckons 40 percent of China’s urban
households now fall into the middle-class category, with annual
income of 60,000 yuan to 500,000 yuan ($9,450 to $78,600). Five
years ago, the proportion was just 10 percent. “This group has
both the capacity and the desire to buy branded products and
more expensive consumer durables as well as spend money on
travel and culture,” said HSBC’s chief China economist, Qu
Hongbin. That’s good news not only for Jaguar Land Rover,
Lenovo, and the thousands of other companies currently flogging
their wares in China, it also bodes well for other companies,
and entire countries, that would like to feed China’s voracious
demand for components, energy, and minerals.
Australia owes much of its long economic expansion to sound
policy-making, but credit is due as well to China’s hunger for
iron ore, coal, and other natural resources. China accounted for
27 percent of Australia’s exports in the first nine months of
2011, up from just 5 percent in 2000. Because the price of
natural resources has soared while the cost of manufactured
goods has fallen, a shipload of iron ore from Australia in 2010
could buy about 22,000 flat-screen television sets, 10 times
more than just five years earlier.
Continued…
