Could little Nicaragua with exports of just $2.7 billion eat a piece of export juggernaut China’s lunch?
The Chinese economic miracle has stretched on for more than 30 years. But George Friedman, chairman and founder of Stratfor, a private global intelligence firm, contends in a new report that the “era of Chinese development — pyramiding on low wages to conquer global markets — is ending simply because there are now other nations with even lower wages and other advantages.’’
Stratfor, which is based in Austin, Texas, lists 16 countries in its Post-China 16 list. They include a dozen countries in Africa and Asia in the Indian Ocean basin. These have the most potential, according to Stratfor.
But there are also four Latin American countries on the list — Mexico, Peru, the Dominican Republic, and Nicaragua —that Stratfor said are poised to take on China’s mantle as high-growth, low-wage exporters for the world.
Because of China’s staggering size, other countries or even regions won’t be able to replace it, the report said. “That means that its successors will not be one country but several countries, most at roughly the same stage of development,” said Friedman in Stratfor’s Geopolitical Weekly.
Chinese exports, meanwhile, rose 7.9 percent to $2.05 trillion last year. But Friedman says the Chinese economic miracle is beginning to reach its limits as wages rise, foreign appetite for investment wanes and development marches on — but in a disorderly and chaotic way.
Chinese officials are predicting 7.5 percent growth this year — brisk by most standards but lackluster for the Chinese economy, which has grown in the 9 percent to 11 percent range for most of the past decade. China’s gross domestic product grew by 7.8 percent last year — the first time growth fell below 8 percent since 1999.
Some analysts say even 7.5 percent growth will be a stretch in 2013.
Collectively, the countries on the Post-China 16 list have a population of 1 billion. Although underdeveloped, Stratfor said they all present opportunities for dramatic manufacturing growth.
There is already movement in that direction in the Post-China 16 countries with expansion in garment and footwear manufacturing and mobile phone assembly, the report said. In some PC 16 countries, such as Vietnam and Indonesia, the shift has been going on for several years.
“In general, we are seeing a continual flow of companies leaving China, or choosing not to invest in China,’’ said Friedman. At the same time, he said, investment flows, particularly from smaller firms, to the PC 16 countries are picking up.
While still small, foreign direct investment in Nicaragua has nearly doubled since 2009, and between 2009 and 2012, foreign direct investment in the Dominican Republic increased by about 67 percent.
Eric Farnsworth, vice president of the Council of the Americas and Americas Society, said he agrees that some of China’s business may ebb away as wages increase and China becomes more of a middle economy, “but not all of China’s business.’’
“The main reason is the sheer capacity of China. When you’re comparing China to Nicaragua, it’s like comparing an elephant to a mouse,’’ he said.