WorldCity Business Magazine

Watching the speed limit

by Ken Roberts

China’s runaway growth won’t continue forever. Will South Florida companies be ready when the brakes are applied?

A few years ago, when conventional wisdom held that the Internet-driven stock market could only go up, it went down. For the last couple of years, as it appeared only the clouds could stop condominium growth in South Florida, the market has cooled.

And now everyone, or nearly everyone, seems convinced that China is the unstoppable “new new thing,” to borrow the title of a book written during the height of the Internet boom.

The Internet has, of course, proven to be quite real and lasting, although the NASDAQ has yet to fully recover from those halcyon days. Entire industries have been and continue to be turned on their heads by the digital revolution.

Meanwhile, those condos may be selling more slowly, but they will soon enough be filled with real tenants rather than simply held by speculators. It’s a safe bet that people will continue to flock to South Florida, although it might take a few years before the market corrects itself and the laws of supply and demand come into balance.

And so it is with China.

Throughout history, China has been among the world’s top economies, a source of innovation across a wide range of disciplines, a leading power. That’s a fact obscured only by recent history. The China we know with the socialist-totalitarian government is but a brief moment, historically speaking, on the country’s time line.

The question is not if China will hiccup but when, and perhaps why.

Could U.S. problems with oil-producing nations Iraq, Iran, Venezuela, perhaps even Mexico (think immigration), to name four lead to the $100-a-barrel oil some are predicting? And would that, in turn, send the economy that supports China into a tailspin?

Could internal unrest fueled by greater access to information via the Internet despite government attempts at censorship or by inequality between urban and rural dwellers lead to a new Tiananmen Square, sending reverberations through the world economy at the same time? Or, the flip side, could a freedom movement erupt, destabilizing a still-ironhanded government?

Could the world’s financial markets force China let the yuan truly float, thereby adding 25 to 40 percent to the cost of the $81 billion that country exported to the United States in just the first four months of the year.

What about terrorism? While the United States spends billions on homeland security, what impact could a bio-terror attack have in any of China’s manufacturing centers?

Oil shock, freedom’s tug, money squeeze, enemies unforeseen? Chicken Little nonsense? Maybe. But the likelihood that China’s ascent will continue to be a perfect trajectory seems akin to betting to the inside straight in poker. NASDAQ 10,000 was the rallying cry not so long ago. A race to toss up the next condo tower has only recently subsided.

But like the Internet, like the condominium buildout, China is for real. The trick will be riding it out.

There are two Chinese characters for “crisis,” Office Depot’s Wilson Zhu explained at a Beacon Council event focused on a Miami strategy for China. The second, when pulled apart, means “opportunity,” he noted.

And so it does. And so it will.