It was hard to believe that companies would fall for the China trap 15 years ago. But they did – the honey was to hard to withstand. But now many have gotten burned and everyone has become aware of China’s practices. They might have stolen a lot of “Know How” over those years but this is like a Ponzi scheme. You need ever more of the stuff that keeps you going just in order to prevent systemic collapse. And just now, the foreigner that have showered China with cash and free IP are disappearing at a rapid clip. China’s economy will freeze economically and become a fossil if they cannot create a market that deserves the name.
In a recent column, I observed that by many measures, China is the world’s largest economy. This means a number of benefits will now flow — and indeed are already flowing — to China that used to go to the U.S. and Europe. Chief among these is agglomeration, of the tendency of businesses to seek out the biggest markets and the densest concentrations of economic activity. Being the center of the global economy really does have value.