Tim Cook, the head of Apple, the world’s largest high-tech company, said in Beijing that the relationship between the company founded by Steve Jobs and the People’s Republic has a “symbiotic nature” and that intends to multiply investments and production in China.
Apple produces more than 70% of the “i-phones” (“smart mobile Internet”) it sells to the world in the People’s Republic; and its main supplier in China is Foxcomm, which employs more than one million workers, headquartered in the eastern city of Zhengzhou.
Tim Cook was met with applause and cheers by a multitude of users in the main “Apple Store” of the People’s Republic, located in the heart of Beijing.
Apple leads a group of large North American companies that produce and invest in China and aspire to multiply their high-tech investments thereincluding Bridgewater, a major investor on Wall Street, Pfizer, the major pharmaceutical company in the United States and the world, and Procter & Gamble, a consumer giant in the US economy, among others.
China is today the axis of world consumptionand the reason for this crucial fact is that the per capita income of its population of 1.44 billion reached $12,741 in 2022, which means that it was incorporated into the category of “middle-income countries,” according to the World Bank; and is drawn into this condition by a middle class of 500 million people with incomes comparable to those of the United States (US$45,000/55,000 a year).
The purchasing power of this population intensifies when it crosses with an inflation rate of 3.3% per annum, which is the average level of the last decade; to which we should add that per capita income rises by 8.1% per year, with available expenses, after having satisfied the “basic needs” of housing, food and health, which increase by 15% per year.
The peculiarity of the Chinese economy is that its gigantic, completely unified domestic market is characterized by the fact that it is the most integrated in the world: the international trade/GDP ratio is equal to 75% of the total.
This is why it systematically attracts one of the two largest investment rates from transnational corporations (FDI amounted to $185 billion last year).
Due to the systematic increase in labor costs, due to the almost constant improvement in wages in real terms, China’s economy now depends on the rate of innovationwhich in turn is the result of the increase in total factor productivity (TFP), synonymous with continuous improvement in the quality of production.
High levels of consumption equal a strong and constant boom in innovation. This it is the hub of China’s growth in 2022/2023.
Consumption represents 55% of GDP in the People’s Republic (82% in the United States and 75% in Japan); and everything points to it the proportion of consumption on product in China rises from 55% to 75% in the next 10 years; and this implies a profound, irreversible change in world consumption, because this is happening in a country of 1,440 million inhabitants which is already at the “high income” level.
It is the first time this has happened in the history of capitalism: it is equivalent to the discovery of “gold in California”, multiplied by 10 or 15.
Here because world production tends to be oriented more and more towards the domestic market of the People’s Republictransformed into a gigantic magnet that attracts the most sophisticated goods of the world system.
This was announced last year by the People’s Bank of Beijing Chinese consumers have $2.6 trillion in savings, the result of 3 years of abstention caused by the pandemic; and the central strategic datum is that they have now begun to direct it towards the domestic market, which implies that starting from May the full return of the euphoric consumption that characterized the People’s Republic until 2019, when it reached the United States, must be taken as fact: $7 trillion, a third of GDP.
The phenomenon of Chinese consumption extends to the whole region. Asia’s consumption was 23% of the world total in 2000, rose to 28% in 2017 and will reach 52% in 2040.
The Japan Center for Economic Research (JCER) estimates that China’s (People’s Republic + Hong Kong) economy will grow to $41.8 trillion by 2035, about as much as the combined economies of the United States and Japan, which would reach then 42.3 trillion dollars, with the addition that the People’s Republic would have a per capita GDP of 30,000 dollars a year in 10/12 years, tripling current levels.
It should be emphasized that in this category, which China has entered, the essential thing is no longer the rate of expansion, but the level that the income distribution acquiressupported by the intensive consumption of all social sectors.
To understand China, the most practical thing is assume your logic, which is to put time in your favorfollowing the fundamental tendencies of capitalism as a global system.
This is the most reasonable way to pinpoint what is happening in China right now.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.