Is China the Answer

1. Is China the Answer? To Many Countries and Citizens Around the World to the Problems International Economy Is Facing the Guilts Are Being Pointed to China. Weather Its the Escalating Price of Oil, the Scarcity of Raw Products or the Increase in the Number of Companies Bankruptcies China Is Said to Be the Main Reason. But to What Extent Is It Really to Be Blamed and Does the Beneficts of Such a Chinese Economical Role Surpass the Wrongdoings? To Try and State the Answer to That Question Is the Current Objective of This Work!

2. The Awakening Even though the United States are from a long time the biggest world consumers of resources this situation is changing as Chinese economy is pushing forward and reaching leadership in the consumption of resources one after the other. Among the five basic products, foodstuff, energetic, e industrial � cereals and meat, oil, coal and steal � China has already beaten the USA consumption in all but oil. As for steal, a key indicator of the industrial development its usage in China is twice higher than in the USA: 258 million tones versus 104 million tones. As for oil USA are still the major consumer with three times more than China - estimated in 20,4 million barrels a day versus 6,5 million barrels. But while in the USA the used oil increased only 15 % between 1994 and 2004 in China the consumption more than doubled. It currently takes the second place only after the USA. Nevertheless China fulfills nearly two thirds of its energetically needs through coal as they burn 800 million tones and in the USA that is of only 574 million tones. The usage of natural gas is also bursting. As for the consumption of products from electrical equipment to automobiles they are growing rapidly but in the electronics field Chinese market if facing as astonishing increase. In 1996 China had 7 million cell phones and the USA 44 million.

3. The Awakening In 2003, China had already 269 million versus 159 million in the USA. Among the major consumption goods china is only behind in automobiles. In 2003, had 24 million, nearly one tenth of the 226 million that there are in the USA. Nevertheless with the car selling doubling in the last two years Chinese fleet is narrowing the gap. China is importing huge amounts of cereals, soja, iron ore, aluminium, copper, platen, potassium, oil e natural gas, forest products for wood and paper and cotton for its strong textile industry. These massive imports place China in the center of the world economy of raw products. This voracious appetite for this sort of products is causing not only a rise in their prices but also in that of the maritime transportation. The need to reach this products and energy is influencing its foreign and security policy outline. The strategic relations with resource rich countries like Brazil, Kazakhstan, Russia, Indonesia and Australia are being built around long term providing contracts for goods as oil, iron ore, natural gas and wood. Those countries welcome these strategic bonds as they act as a counterweight to the USA powerful influence.

4. The Chinese Threat For thousands of years, China has been what is known as a �continental power.� That is, it had everything it needed right at home and was not dependent on sea borne trade to survive (like Britain and Japan, which are classic examples of �Oceanic Powers.�) But now China is an Oceanic Power, with over half of its GDP coming from exports to foreign nations. Moreover, nearly all the oil China uses is imported via seagoing tankers. China is now more dependent on access to the sea than Japan, which� gets about 20 percent of its GPD from exports, or the U.S., which gets about ten percent. With 1.3 billion people, the People's Republic of China is the world's most populous country and the second largest oil consumer, behind the U.S. In recent years, China has been undergoing a process of industrialization and is one of the fastest growing economies in the world. With real gross domestic product growing at a rate of 8-10% a year, China's need for energy is projected to increase by 150 percent by 2020. To sustain its growth China requires increasing amounts of oil. Its oil consumption grows by 7.5% per year, seven times faster than the U.S.

5. Current Situation In 2004, the curtain went up on China's performance. That year China's import and export volume reached $1.1 trillion, double its 2001 volume. China became the world's third-largest trading nation, next to the United States and Germany. China accounted for one-third of the growth in world oil consumption and 90 % of the increase in world steel demand. At one point in 2004, China's voracious appetite for materials for its white hot construction and manufacturing markets tied up 20 % of the world's bulk shipping capacity. Freight rates on transoceanic shipments soared by some 300 %. U.S. builders ran short of cement. China now accounts for 13 % of the world's gross domestic product, based on purchasing power parity exchange rates. In 2001, the Chinese purchased 2.2 million cars. By 2004, its domestic automobile market exceeded 5 million. In the next 15 years, China's car market is expected to surpass 20 million, exceeding that of the United States. China, however, is in the midst of its Industrial Revolution and is already the top market for consumer goods multinationals such as Proctor & Gamble.

6. Unexpected Growth Chinese growth is not a recent issue, as it was widely known that a country with such potentialities supported by a mentality that encourages entrepreneurship was to wake sooner or later. Yet the markets did not expect the speed and extent of that growth and current adjustments are in place as demand in some areas is clearly above supply. This movement has caused an unexpected rise in the value of raw products, which China is a major consumer. Until the supply meets with the demand in equilibrium a few years might go by but in the meantime markets struggle to adapt to the awakening of the Dragon.

7. Chinese Market Evolution Since 1990, China�s economic growth has been nurtured by large inflows of foreign direct investment (FDI), and since 1995, these have been coupled with trade surpluses - leading to substantial balance-of-payments surpluses overall. Although in terms of GDP per capita China still remains far behind the industrialized countries, because of its large population, China has become the world�s sixth largest economy. Today its nominal GDP is larger than Italy�s and is just slightly smaller than the GDP of France. With an average real GDP growth rate of almost 10 percent per year since 1980, the wakening giant is catching up fast. For the last two decades, China has outperformed the average 2.7 % growth rate of Japan and of the 2.9 % of the United States. Although production for the large domestic market was the main driving force in the first decade of China�s transition to a market economy, production for export - and consumption of imports - now adds great momentum to the fast output expansion. Chinese exports have expanded much faster than those of Japan and the United States. This process has accelerated since the early 1990s and today China has become the world�s sixth largest exporting nation - likely to surpass France, the UK, and probably even Japan within few years.

8. Chinese Market Evolution Although in 1980 only 5.4 % of Chinese exports went to the US, in 2001 the percentage had risen to 20.4 %, with a strong tendency to rise further. China�s imports from its smaller East Asian neighbors rose from 6.2 % in 1980 to 40.9 % by 2001. Exports have shifted away from agricultural products and raw materials to manufacturing. In 1985, agricultural products, 14.92 % and raw materials 35.61 % accounted for about half of Chinese exports. Basic manufactures (leather, wood, paper , textile yarn, iron and steel, nonferrous metals, etc.) and chemicals were another 21 %. Today the composition of Chinese exports shows the characteristics of an industrialized country. In the year 2001 the relative weight of agricultural products 4.92 % and raw materials 4.93 % has fallen to less than 10 %. The percentage of basic manufacturing products including chemicals has remained much the same, while the percentage of machines, transport equipment, and miscellaneous manufacturing goods, (clothing and accessories, precision instruments, photo and optical equipment) has risen to almost 70 %. Imports also show marked changes, but more or less in the opposite direction. There was a relative increase of raw material imports from 8 to 18 % of total imports and some decline in imports of basic manufactures as China�s own middle-tech industries have taken off. China looks more and more like an industrialized country and less like an agricultural developing one. Although average per capita income in China remains much lower than in the older industrial economies, the gap is narrowing.

9. Chinese Commerce China, like the United States, is becoming an indispensable partner, wants to buy raw materials with no value added and to export consumer goods. Chinese exports are one of the major factors of the outstanding economical growth. The reason for this success is the relatively easiness in which their products enter the markets. Many Chinese emigrants when settling in a new country open stores or restaurants and start selling Chinese products and their way of living. This is in many cases the tip of the spear of their entrance in a specific market. It is not only this privileged access to the markets that makes it work, the products are much more cheaper than those produced locally even though the quality might in some cases be inferior. Nevertheless a great deal of these price advantages are blamed to the social dumping as the social conditions of the workers producing the goods in China are inferior to those in the other countries, therefore making labor costs inferior. Their currency, which according to analysts is at an artificial low value, also helps making their goods more appealing.

10. Chinese Turkish Cooperation In 1981, China and Turkey signed a trade protocol. In December 1981, the two signed the agreement on economic, industrial and technical cooperation. In June 1985, they signed the minutes of talks on cooperation of economy and technology, trade, civil aviation and telecommunications. In October 1991, each side set up bilateral entrepreneurs' council respectively.

11. Chinese Turkish Relations Due to the quantities of China�s import of iron and steel from Turkey, the total trade volume between the two countries reached a record of $648 million in 1994. China�s export to Turkey had been growing steadily since 1995 with the boost of competitiveness of Chinese commodities, and reached $2.065 billion in 2003. On the contrary, Turkey�s export to China kept at a relatively low level of $533 million in the same year because of the disadvantage of high prices. As the demands in China�s market are expanding rapidly, the potentials of Turkey�s exports to China still remain. In recent years, as the Turkish side took the measures such as anti-dumping, quotas, and safeguard to restrict the import of Chinese commodities, the export of many Chinese commodities to Turkey dropped. Despite of this, the mutual investments between China and Turkey are increasing. More and more Turkish entrepreneurs start to embrace the Chinese market and investment environment. Turkish companies such as Cimtas Steel Processing Co. Ltd., Unsa Ambalaj Sanayi ve Ticaret A.S., Turk Demirdokum Fabrikalari A.S., FABEKS Dis Ticaret A.S. have successfully invested in China and set up their own factories there. Garanti Bank opened its branch office in Shanghai as early as 1999. Meanwhile Chinese investors are paying more attention to Turkey as well. In 2003, an investment research delegation headed by H.E.Lu Fuyuan, former Chinese Minister of Commerce, paid a visit to Turkey. Chinese companies such as Ningbo Haitian Machinery Company, Xiangtan electronic motor factory, Mingming optical Co.Ltd. etc. have made investments in Turkey.

12. Exports Outlook As seen before there was a great change in the products that China currently exports from agricultural and raw products to machines, transport equipment, and miscellaneous manufacturing goods, and today the most rapidly growing Chinese exports are middle-tech - and increasingly high-tech - manufactured goods. But basic manufactures and chemicals still account for the vast majority of exports. China runs a huge and growing bilateral trade surplus with the United States, and the position of Japan has changed radically from being a net exporter to China in the 1980s and most of 1990s to being a net importer today. China�s smaller East Asian industrial competitors such as Taiwan, Korea, and Singapore face fairly difficult readjustment problems as they try to follow the path laid down by China. Recently China replaced Japan and Mexico as the largest single source of U.S. imports of consumer electronic products and information technology hardware such as computers.

13. Imports Outlook Also in the imports scenario there were changes but they were in the opposite direction as Chinese imports of primary products and industrial raw materials faced a sudden increase. Basic manufactured products have seen a significant downturn in demand as Chinese industry started to replace that sort of imports. Today China reports large import surpluses with the ASEAN group and other rich natural resources countries.

14. The Restrictive Measures Currently textile associations are lobbying so that restrictive measures are imposed to Chinese goods otherwise they say the industry will not last long. Nevertheless there is another side that demands exactly the opposite. A big number of associations and countries, such as Germany are requesting that the matters should remain as they are. What they want is that no restrictions should be imposed to the imports, because their needs are for semi-finished cheap goods that enables the products where they are incorporated to become cheaper or for retailers that want to boost consumption and margins through a lower goods price. On the other hand those countries or industries that have failed to follow the market and are in great difficulty to keep up with the current level of prices or where unemployment is very high are those who demand those restrictive clauses to be enforced as soon as possible so as to smooth the downturn and reduce the unemployment escalation. The European Union has recently restricted and arrested some classes of Chinese imported textile goods but soon after, under external and internal pressure has agreed to let the ships unload their cargo and let it cross the European border. The American lobbying powers are also making efforts to restrict imports of some categories of goods but have been so far unsuccessful.

15. The Textiles Sector The textiles sector is just one of areas in which Chinese competition is causing instability in the markets. As this is normally a working intensive area the results of this readjustment in the countries affected by this raise in competition are a significant increase in the unemployment rate. Nevertheless the current Chinese exporting trend is much higher than the supported one under the WTO agreements, this means that the exports growth is being too big and too fast. Therefore this countries try to implement safeguard clauses to the imports of some goods as they claim that their local industry is under verge of collapse so the current production level must be readjusted so as not to break the limits and force the implementation of those safeguard clauses by both the EU and the USA. Nevertheless, according to a French minister the usage of these restrictive clauses in the French situation are not destined to protect its own textile sector, because that one has long went up in the added value scale, but to protect producing markets on the border of Europe that they do not want to be destabilized otherwise it might disturb its current delicate imbalance and harm Europe. In fact most of the European textile sector only works in more lucrative goods that require more specific skills in which the Chinese market does not yet posses know-how.

16. The Textiles Sector Nevertheless many of the new factories that operate in the Chinese market and whose production is now flooding western countries markets, were built by developed countries companies that wanted to enjoy the lower costs advantages. They replaced their previous production facilities from the border countries or even some least developed countries of Europe by new ones in the big, cheap Chinese market. Their idea was to produce the work intensive products there and make the final assemble and the most complex parts in their home countries where there is knowledge to perform them more suitably. Therefore the limitation to the imports of such goods is backfiring, as the most harmed entities by the restrictive clauses are being those of the countries imposing the limitations.

17. Currency Policy As it is known countries can use their ability to control the float of their currency value in order to promote a different competitive scenario yet this option poses some risks. Most countries have to import some of their consumptions and afterwards desire their companies to export some part of their production. If in the imports situation is desirable for the companies to have a strong currency so as to spend the least amount of their currency in the transaction for the government such scenario is undesirable because it will make foreign products cheaper than those of the country and would make exports and local products consumption more expensive. For exports, countries desire to have the currency in such a low level that for foreign countries it is cheap to by its products. Yet these intents not always satisfy the hole economy of that country because heavy importing companies that rely on foreign products for the bulk of their products want to have a strong currency, while working intensive industries desire a low currency to make them more competitive. Furthermore if the country decides to reduce the value of the currency it can induce inflation tendencies as products become more expensive as the foreign consumption of the products presses prices up, as they are now demanding more of the countries money to be bought, but national products become more appealing, at least for a while. Else if the option is to increase the value of the currency, a deflation scenario can arise and also products can be raised to such a level that they are no longer competitive in the outsider markets, therefore reducing exports. Additionally foreign products become more appealing to the internal market, boosting imports. But if the companies are up in the added value chain their vulnerability to increasing in the value of the currency fluctuations will be smaller.

18. The Renminbi On the macroeconomic side, China has been a stabilizing influence. While maintained a steady high growth and exchange rate stability at 8.28 Yuan per dollar since 1994, it has largely avoided, and thus dampened, the business cycles of its East Asian trading partners. However, foreigners, particularly Japanese, are upset with China�s �excessive� mercantile competitiveness. They are urging China�s government to appreciate the renminbi - and show greater future exchange rate flexibility, which could lead to repetitive appreciations. Nevertheless the result might be severe deflation throughout China�s economy and a zero - interest liquidity trap - as in Japan, when forced into repeated appreciations of the yen in the 1980s into the mid 1990s.

19. The Renminbi The current value of Chine currency, the renminbi, is not allowed a free float according to the market needs. Instead the government sets a limited boundary between witch it can float. These limitations have as a consequence that Chinese currency is under valuated making its exports more attractive to foreign markets. Even though foreign governments press local authorities to reevaluate the Renminbi the last reevaluation was a more symbolic one than effective also the indications given by the authorities suggests that those sort of movements will be made according to their calendar and not with that of the international community. When he was pressed on the revaluation of the renminbi at the recent G8 meeting in London, Governor Zhou Xiaochuan�s response was that �China needs more time to reform its banking and financial systems to pave the way for reforming the currency policy,� and also �Chinese economists argue, their economy is extremely vulnerable to external shocks because it's extremely open.�

20. Foreign Trade Superavit The commercial relations between China and USA are very unbalanced, as the Chinese superavit has reached the record level of $160 billion trade surplus. These numbers put the American authorities uneasy and in recent declarations have urged Chinese authorities to revaluate their currency. Many other countries face the same situation and are becoming unhappier and joining their voice to the choir that demands this stabilization measure to be implemented. This would result as we have seen before in making Chinese products more expensive for Chinese exporting markets and on the other hand their products would become cheaper to Chinese people, this concerted movement would help those countries to balance their trade deficit with China.

21. China�s Future Steps All statistics show that China boosted by its strong economic growth together with its numerous population will soon be the first consumer in the world of nearly all commodities. This situation as set the Chinese authorities in alarm and they are now insuring that in the future those indispensable products for economical growth or even survival are to be provided. Nevertheless many of the countries that have these products have privileged relations with other developed countries for the supply of those goods. This situation makes the access to these goods more difficult and as the range of available countries decrease being choosy is not an option.

22. Chinese Diplomatic Efforts To secure that the resources their economy demands Chinese diplomacy is directing towards natural resources rich countries, such as those in the African continent and to those countries that have long standing issues with America. In this situation trading privileged relations are being negotiated with Venezuela regarding oil. They are also targeting countries that want to decrease their overexposure to that same market so as to diversify their exporting markets by selling more to China. Nevertheless this policy of opting for pariahs states is causing a great problem because it often gives the regimes that rule in those countries funding that are diverted into the continuity of their wrongdoings such as massacres and corruption. As the economical embargo threat is removed by China they have no pressure to change.

23. Chinese Diplomatic Efforts "From the dusty plains of East Africa to the shores of the Caspian Sea, China is seeking to loosen the grip of the United States on world energy resources and secure the fuel it needs to keep its economy in overdrive." China has entered into long-term contracts with many of these countries. It has invested about $15 billion in foreign oil fields and expects to invest 10 times more over the next decade. Last December, China signed a deal with Venezuela and neighboring Colombia to construct a pipeline linking Venezuelan oil fields to ports along Colombia's Pacific coast. This will allow China to bypass the U.S. dominated Panama Canal. China is protecting its energy interests with a string of military bases and diplomatic ties from the Middle East to southern China. Recently, it signed a 25 year oil and gas deal with Iran. Currently, about 80 percent of China's oil imports pass through the Straits of Malacca. China views that Southeast Asia sea corridor as under U.S. Navy control. It is investigating the construction of a canal across the Isthmus of Kra in southern Thailand that would allow it to bypass the straits. Eximbank, had approved a $2bn line of credit to enable Angola to reconstruct infrastructure - electricity, railways and administrative buildings. In return China would receive 10,000 barrels of oil a day. The line of credit, at 1.5% over 17 years, might look disadvantageous to China in the short term, but Chinese companies will secure the lion�s share of lucrative contracts for national reconstruction.

24. Africa and China Although in 2004 only 2 % of Chinese trade was with Africa, the continent has done particularly well as China has opened up to the world: during the 1990s Sino-African trade grew by 700 % and since the first China-Africa Forum in Beijing in 2000, more than 40 agreements have been signed, doubling trade to more than $20 billion over the four years to the end of 2004. By the end of 2005, China is expected to become Africa�s third most important trading partner, behind the US and France and ahead of the UK. Yet according to South African officials China represents �both a tantalizing opportunity and a terrifying threat�. It is a familiar story: �We sell them raw materials and they sell us manufactured goods with a predictable result - an unfavorable trade balance against South Africa�. Since the 1960s, China has been rather consistent in offering assistance to African countries in agriculture, heavy industries, and infrastructure development. In recent years, Sino-African trade has enjoyed particularly rapid growth. Many African leaders, regard China as a reliable friend who has suffered the similar imperialist aggression by Western powers, and welcome investment and development teams from Beijing. �.

25. The Transports Situation Currently, about a quarter of the world�s exports are Chinese, and China wants this stuff carried in Chinese built and controlled ships. The same with oil. China imports over 50 percent of what it uses, most of it is carried in Chinese tankers. As Chinese growth caught everyone unexpected so were the transportation companies caught. It�s growth, demands more raw products to be imported and finished or semi-finished products to be exported. The amount and speed in which this happened resulted in a under capacity by mainly the shipping industry to cope with demand. This because the location of both the raw materials and the exporting markets is such that shipping is normally the most appropriate method to dispatch the products. Therefore such a demand pressure resulted in a rise in the costs of transportation, not only through fuel costs increase but mainly through an increase in power of shipping industries. As ships are of lengthier building and demand continues to grow it will take a few years before the prices return to their previous range.

26. The Transport Situation For a few years now China has encouraged its own shipping industry to build the needed boats. Not only the most common and simple cargo containers but also those who demand more skillful techniques. They are developing complex ship building know-how. In ten years, China has gone from a minor ship builder, to the third largest on the planet. In 2004, Japanese shipyards got 35 % of new orders (by weight) for merchant ships, South Korea 34 % and China 17 %. That�s 86 % of the world�s shipbuilding concentrated in East Asia. Chinese growth has been spectacular, averaging 26 % a year over the last five years. China did this not just with cheap labor, but also by developing technical expertise. China can now build ships up to 300,000 tons. This effort is driven by China�s growing export trade. China uses the profits, and technical capabilities, gained from all this activity, to build warships. In China, commercial and military ships are often built at the same facilities, or adjoining ones. With a growing merchant marine, China wants to build a navy powerful enough to protect it.

27. The Raw Products Situation Raw products used to have a price fluctuation pattern that even though included some changes went round the same target price once inflation was considered. This situation made that investment in mining/extraction or production of those goods was made solely to replace the previous capacity as the market had reached stability and no further investments were profitable. Yet with the sudden increase in the demand, China caused the scarcity of such products and made their target prices went up. This market reaction changed the investment set for this products and now improvements and investments in capacity increase are being made, but are still many years from being fully operational. Nevertheless some of these rising movements are caused by fears of instability, like in the oil situation, where fears that the current productive capacity fails to give the expected output, maintenance or that natural disasters or political instability interrupts production.

28. Energy Issue The 10th five-year plan has already had to re-adjust its figures for electricity consumption. �In 1999, the country produced 300,000 MW, by 2002 that was 338,000 MW. The five-year plan was for 380,000 MW, but it has been upgraded to 430,000 MW. The state planning has set the target of 900,000 MW by 2020. That�s a tripling of energy supply over 15 years.� That means adding enough new power stations to supply the entire energy needs of Sweden each year for the next 15 years. Whole power and coking plants are being dismantled in countries such as Germany to be rebuilt in China. China�s reliance on low quality, high sulphur coal is responsible for roughly half of all sulphur dioxide emissions, which causes acid rain throughout East Asia - a situation that has contributed to tensions with Japan and South Korea. Globally, China is one of the world�s largest contributors to ozone depletion, biodiversity loss and climate change. Nevertheless consumer demand makes up only 13 % of energy consumption in China at the moment. It is the heavy industries of iron, steel and cement-making that are using the vast bulk of the energy and causing the greatest pollution. China already makes 30 % of the world�s iron and is the biggest steel producer in the world. In 1994, coal accounted for 75 % of China�s total energy consumption and that will continue until 2020. But China needs oil for the rapid rise in car and truck usage and for its plastics industries.

29. The Oil Situation In 2004, China's oil consumption rose by 40 %, to 6.5 million barrels a day. U.S. domestic demand is 20 million barrels a day. U.S. demand is rising by about 500,000 barrels per day per year. China's is increasing by about 1.5 million barrels per day per year. China currently imports 32 % of its oil and is expected to double its need for imported oil between now and 2010. China's expectation of growing future dependence on oil imports has brought it to acquire interests in exploration and production in places like Kazakhstan, Russia, Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. But despite its efforts to diversify its sources, China has become increasingly dependent on Middle East oil. Today, 58 % of China's oil imports come from the region. By 2015, the share of Middle East oil will stand on 70 %. The Chinese set up world class manufacturing facilities and simultaneously kept labor costs low. Their expertise in large-scale quality manufacturing and high productivity is reflected in some of their products - TVs and appliances - closely matching Japanese and Korean companies in quality and price. The skill and productivity of an average industrial worker in China are better than his Indian counterpart because of the experience curve effect and the dedication of the workers. Besides, the Chinese government has kept working capital interest levels and fuel rates low to ensure reduced product costs. Export subsidies also make the products price competitive in international markets.

30. The Oil and Cars Scenario Growth in Chinese oil consumption has accelerated mainly because of a large-scale transition away from bicycles and mass transit toward private automobiles, more affordable since China's admission to the World Trade Organization. Consequently, by year 2010 China is expected to have 90 times more cars than in 1990. With automobile numbers growing at 19 % a year, projections show that China could surpass the total number of cars in the U.S. by 2030. Another contributor to the sharp increase in automobile sales is the very low price of gasoline in China. Chinese gasoline prices now rank among the lowest in the world for oil-importing countries, and are a third of retail prices in Europe and Japan, where steep taxes are imposed to discourage gasoline use. �If each Chinese family has two cars like US families, then the cars needed by China, something like 600 million vehicles, will exceed all the cars in the world combined. China has invested in energy-intensive industries, such as steel and aluminium production, and plastics, which use naphtha derived from crude oil. This combination of heavy industrial expansion and car usage has doubled Chinese oil consumption over the past 10 years to around six million barrels a day.

31. The Oil Rises Impact Many analysts claim that today�s oil crises is not by far as threatening as that of 1980 when the oil barrel went up to $84 at current prices, because economy doesn�t need as many energy to provide the same product, this is, production is more energy effective. Also the competitive scenario together with a price reduction in some semi-finished and finished goods (Caused by China) helped inflation to remain mainly controlled. This because even though oil and some products have had a great increase some other goods normally used in production face an opposite price movement. It is said that even tough oil rises, prices remain stable because China is exporting deflation, this is to say that the products now bought are cheaper as China produce them more efficiently. In addition companies also opt to cut on their margins rather than transfer the cost increase to consumers as competition as grown stronger and consumers are not willing to take the price increase burden. Nevertheless, when inflation is considered, the current value of oil is still at a lower level of that of 1980, and central banks are adjusting their policies to ensure that the oil bump is smoothed.

32. The WTO The world trade organization is the institution in charge of regulation and monitoring of the commercial relations between the organization member countries. It is based on the principle that all member countries are equal and what is done towards one must be done to them all. Its members are free to export to the other members according to the same rules as others do. There can be no preferential partners. Very few constraints are allowed to the commercial relations between countries. Whenever there is a commercial dispute among members, negotiations are held under the WTO supervision. On the first of January of 2005 China officially became a member of the WTO and had direct and nearly unconditional access to other markets with high income that previously defended themselves against its cheap products.

33. Expected Growth The Chinese economy is currently in a fast growing tendency. The future tendency is expected to go near the two-digit rate. Nevertheless measures are being taken by the government to reduce the growth rate to levels more acceptable so as not to overheat their economy and risk the formation of speculative bubbles. Examples of that are the government warnings to the banks for the implementation of tougher restrictions to their lending policy and the recent penalties for the oil consumption destined to cut down on the huge level of investment. Some other sectors where according to the government further investment is unnecessary are facing a decrease in the number of opening licenses. Currently the state is trying to shift the industry tissue through a licenses restrain but nevertheless the growth is expected to continue at a steady pace.

34. Turkish Textiles Chinese current role in the textiles sector leaves barely any space for any other competitor. Yet current restrictions enforced by the EU and the predicted ones by the USA, make room for some shifting in production. Nevertheless it is clear that previous production patterns are no longer viable. New products must be sought as Turkish textiles if wanting to survive must go up in the chain of value. This means that more technical/skillful and less work intensive goods must be produced. Such movement results from the fact that the salary earned by the Chinese textile workers is far smaller than that or the Turkish ones. This �social dumping�, competitive advantage by both using poor working conditions and working benefits suppressed to their workers, makes it impossible to make the same product at similar costs. The only way out to preserve some of the industry is to accept their comparative disadvantage in the costs area and focus on other areas that demand certain knowledge or techniques Chinese and other low cost producing countries do not master yet. This might mean in certain situations to buy part of the production on those markets and do only the most profitable tasks at their home markets.

35. Turkish Restructuring While companies such as Karsu, Yesim, Sarar, Damat, Bahariye, Dinamo and Guney Industry are among the major companies in Turkey, the leading company is the famous sports clothes manufacturer, Nike. Nike�s t-shirt, which is designed to allow easier running in windy weather, has received a great deal of interest. The popular products in Turkey are items produced by companies like Yesim and Damat using waterproof and stain proof fabrics. Sector representatives say that these products are four or five times more profitable since they have a higher added value than other ready to wear and ready made products, and now at least a thousand other companies will soon shift to this sector. The Turkish textile sector is moving towards more profitable technical (smart) products after it lost its competitive power against Chinese products following the revaluation of the Turkish Lira, increasing costs and the elimination of quotas at the start of the New Year. As Far Eastern countries, primarily China, will not give up on price competition very soon, these technical products might be a new way for the Turkish textile sector.

36. Turkish Restructuring Foreign Trade Undersecretaries took action and established a Technical Textile Working Group: their target is to provide Turkish firms the opportunity to take a $5-6 billion share in the $120 billion world market by only selling their products to Turkey�s neighbors. According to the authorities, the Turkish Textile Sector can overcome its problems by investing in this area. The textile sector in the US and Europe, especially Japan, purposely ended conventional textile production and began to produce the high performance technical textile products sector in which there is not as much intense competition and the profit rates are higher. For instance, 6 million people were employed in the textile sector in Europe only a few years ago, however this figure has fallen to less than 2 million at present. This same process will undergo in the Turkish market weather it will mean many of few job losses it will depend on how well the companies take advantage of these new opportunities.

37. Turkey Example Orka Group General Coordinator Osman Arar, manufacturer of Damat, which started to manufacture smart fabrics using nanotechnology three years ago, says these types of products have entered every part of our lives thanks to the benefits they provide. They are also a fast growing and very profictable market.