Superfusion: How China and America Became One Economy and Why the World's Prosperity Depends on It | 
| Author: Zachary Karabell
Publisher: Simon & Schuster
Category: Book
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Rating:  7 reviews
Sales Rank: 21518
Media: Hardcover
Pages: 340
Number Of Items: 1
Shipping Weight (lbs): 1.2
Dimensions (in): 9.3 x 6.4 x 1.1
ISBN: 141658370X
Dewey Decimal Number: 337.73051
EAN: 9781416583707
ASIN: 141658370X
Publication Date: October 13, 2009
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Product Description
THE EMERGENCE OF CHINA as an economic superpower is now widely recognized, but as Zachary Karabell reveals, that is only one aspect of the story. Over the past decade, the Chinese and U.S. economies have fused to become one integrated system. How China and the United States manage their relationship will determine whether the coming decades witness increased global prosperity or greater instability.Karabell traces the twenty-year history that began with the suppression of the protests in Tiananmen Square in 1989. The Chinese leadership adopted a policy of aggressive economic reform and courted U.S. companies and expertise. Karabell charts how integral those companies -- including Federal Express, Kentucky Fried Chicken, Avon, and Wal-Mart -- have been to China's success and how integral China has been to their growth. Though accelerated by the admission of China to the World Trade Organization in 2001, the economies began to fuse without attracting much notice. Preoccupied with the threat of terrorism and wars in Iraq and Afghanistan, the United States soon found itself deeply in debt to China while also reaping the rewards of China's growth. Now both countries find themselves in an unfamiliar and challenging position. After years of seeking closer integration with the United States, China has begun to question the wisdom of that embrace. The United States, buoyed by China's loans, faces a level of dependency that has generated considerable anxiety. The intertwinement has enhanced the global economy but undermined the sovereignty that governments so crave. Yet, as Karabell argues, the fusion has advanced too far for either to extricate itself without severe harm. The challenge for the United States is to embrace this new world even with some loss of relative power in order to ensure its prosperity in the future; the challenge for China is to recognize that it is now a major player on the world stage with all the risks and responsibilities that entails. We need them and they need us, but the jury is still out on whether either can fully accept that new paradigm. In a book rich in individual stories, Karabell, informed by his considerable experience, not only provides the first comprehensive account of how these two countries became one economy but also makes a compelling case for why its continuation in the future is a vital element of a stable, prosperous world.
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| Customer Reviews:
Showing reviews 1-5 of 7
 Best China Book I've Read October 7, 2009
Harold Kellman (Fremont, CA USA)
27 out of 29 found this review helpful
I have been interested in China since 1998 when a good friend married a Chinese national and encouraged me to visit and make up my own mind about the Middle Kingdom. I have read 15 books about China and visited three times in the last 14 months. Zachary Karabell is the first author to put together a comprehensive historical and financial framework that explains what has been going on in China for the last twenty years with on-the-ground personal experiences and portfolio management insights from his several years as running a successful China mutual fund. He explains how Kentucky Fried Chicken, Avon and Federal Express achieved success but I was more interested in his not-as-well known company examples which included [...], [...], China Life Insurance, and Huawei Technologies.
Deng Xiaoping's economic reforms in China have been going on for thirty years. Everywhere I went and talked to young Chinese (through an interpreter who spoke Mandarin) they mentioned Deng's remarks "to be rich is to be glorious" and "Black cat, white cat, what does it matter as long as it catches mice?" The well educated twenty to thirty-five year old Chinese men (and women) know that the 21st century is their century. These "Chuppies" - Chinese yuppies - were everywhere in Shanghai and Hong Kong. Their internet phones and laptops were ubiquitous and more advanced than mine. The only thing I did not understand was the fascination with massively multi-player online role-playing games in internet cafes.
My only quibble is that the term "Chimerica" (which was coined by Niall Ferguson) would have worked better in the title instead of "Superfusion".
I highly recommend this book. Also, if you haven't been to Asia, go to Hong Kong and Shanghai. Those skylines with their new 100 story buildings put New York City to shame.
The Future Is 'Superfusion' October 13, 2009
Yi Liu (Cleveland, OH USA)
30 out of 33 found this review helpful
"Here begins our tale. The empire, long divided, must unite; long united, must divide. -- Moss Roberts (translator) "
Last Wednesday (Oct. 7, 2009), Alcoa surprised Wall Street by reporting a profit for the most recent quarter after three consecutive quarterly losses. CEO Kleinfeld said, "China clearly is back and back very, very strong and pulling some of the Asian markets."
This is just one of many examples showing how "China" is positioned in this worldwide financial meltdown and recession. While some blamed China as the cause of this crisis for its currency policy and cheap goods, others hope China will be the very engine that pulls the world, especially epicenter of the crisis, the United States, out of recession.
Zachary Karabell, an American author, historian, money manager and economist, is the President of River Twice Research, where he analyzes economic and political trends. With several 4-5 star books at hand, Karabell wrote a new book to tell us the story behind China's rising economy and its "superfusion" with the United States.
First, the book started with the economical background in China and Unite States. China was poor after decades of command economy and isolation. Deng Xiaoping was determined to open China to foreign investment. United States was at the dawn "New Economy" and big companies were lagging and searching for opportunities around the globe.
Then, the author moved on with stories of three big names (KFC, AVON, FedEx). They invested in China heavily without much short-term return but aimed for the future. In the meanwhile, China utilized foreign capital for development while it still kept financial system partially isolated.
At the turn of new millennium, China's economy started to rocket accompanied by huge return for foreign investment, rising Chinese influence, interdependence between China and United States and tension with the western public, especially what happened along with the Olympics last summer.
After citing several key economical data and political events, Karabell concludes that China and Untied States have become "Chimerica" with closer and closer economical tie between each other despite increasing tension between the nationalities. And the prosperity of the world economy also depends on this "superfusion".
As a reader who grew up in China for 20 years then moved to USA for graduate school 4 years ago, I am immersed in the author's knowledge behind geopolitical public opinions and his subjective view on controversial political ideology on either side. To name a few, I nodded when he talked about the diplomatic dictatorship of USA over other countries including China. I smiled when he mentioned the increasing nationalism among Chinese against the West. I enjoyed his many stories behind major economical/political events happened in either country, such as Tiananmen Square, WTO talk, the Bra War, 2008 Olympics, etc.
I noticed one point on which the author might be wrong. In Chapter 10 (P. 201-2), the author states that "One of the failings of domestic Chinese banks was that they were not attractive for individual deposits." However, AFAIK, the fact is the opposite. Lacking a profound social security system, as well as medical insurance, or unemployment protection, Chinese people have to save a "LOT" in case of any major thing happens. In 2002, National Savings Deposit Balance is 10 trillion Yuan (USD$1.2T), which equals GDP of China in that year. In 2008, the number is CNY21.8T (USD$3.2T). People dare not spend their savings. Thus, the problem is not lack of deposit, it is "Too much deposits". This also suggests a great potential for domestic consuming once extensive social security system assure everyone in China.
About economical superfusion of the world, the author predicted that Chinese manufacturing as well as consuming will be the key to world-wide prosperity. It will also result in a shift of power from the West to the East. A lot of other economists and specialists also predicted this for various reasons. But their views on the fate of USA vary. I agree with Karabell that this shift would not necessarily mean a bad/downturn future for Americans. Actually, they will benefit from this global superfusion and remain prosperous. For further reading, I recommend a book "The Future for Investors". Dr. Siegel discussed this issue from an investor's point of view.
Overall, this is a very good book for understanding the geopolitical and economical interactions between China and United States during the recent decades. It also sheds light upon current world economy issues from a unique angle. I recommend you read this book if you are interested in international affairs, world economy, and/or Sino-US relationship.
In the end, let's go back to the quote in the beginning taken from "Romance of Three Kingdoms". Our world has been long divided ever since; maybe it's time to be united, without conquering. For computing, AMD says, The Future is Fusion; for humanity, Karabell suggests, The Future is "Superfusion". Time will tell...
Timely and Important - October 16, 2009
Loyd E. Eskildson (Phoenix, AZ.)
16 out of 17 found this review helpful
Recent economic travails have triggered intensive questioning of the financial system created by the United States and warped by Wall Street. That has led many to reconsider America's place in the world and wonder whether this is indeed the twilight of American power. At the same time, both China and the U.S., after years of seeking closer integration, have begun to question that wisdom. Author Karabell, however, argues that their fusion has advanced too far for either to extricate itself without severe harm. Over the past two decades, China and the U.S. have become one integrated hyper-economy - 'Chimerica.'
To bolster his point about how the U.S. and China economies are intertwined, Karabell contends that without Chinese reserves bolstering U.S. Treasury bonds in the past 18 months, it would have been far more challenging for the United States government to rescue a crumbling financial system. And without American consumers having bought Chinese goods over the past years, China would never have accumulated the reserves that allowed it to spend hundreds of billions of dollars to support the economy during the worst of the financial implosion. (On the other hand, without the low American interest rates afforded by Chinese funds, the U.S. may not have had a housing bubble.)
China began with a trade economy limited to 5% of GDP in the 1970s - it was isolated, and self-sufficient as best possible - like North Korea today. The process of turning outward began about 20 years ago. First came about ten years of experiments with private enterprise in special enterprise zones. By the late 1990s, "State-Owned Enterprises" (SOEs) were allowed to lay off workers, select banks could pursue delinquent firms for repayment, and many restrictions on size and scope of private companies were lifted. As many as 50 million lost their jobs. At about the same time the government also lifted its once-stringent restrictions on internal travel and migration. Its urban population went from 25% in 1990 to nearly 40% at the end of the millennium - nearly 200 million moved.
This then led to people requesting they be allowed title to own homes, and the sell-off of many state assets. Infrastructure needs jumped. SOE managers became increasingly held to performance standards, given wider latitude, and rewarded or punished for results. China's leaders also learned from watching Russia's early 1990s problems after dictation from the U.S. and World Bank, and decided that China needed to go slower, in stages. (Eg. lower tariffs slowly, not all at once.)
A major early boost to China-U.S. trade was President Clinton's decision to stop making trade contingent on its human rights situation. Reasons: 1)The Chinese weren't budging. 2)The instability hampered businesspeople in both countries. (We really need to stop insisting we know what's best for everyone - it's arrogant and ignorant, even self-defeating. We need to recognize that, as Karabell points out, what China did in the 1990s took the states of western Europe more than a century and the U.S. more than five decades.)
Karabell then tells how KFC and then Avon fared in China. KFC now has about 2,000 locations, representing less than 7% of Yum's branches globally but 25% of profits. Its three-story 700 seat flagship store near Tienanmen Square opened in 1987. A two-piece meal + drink cost about the average Chinese weekly wage. Six years later, KFC had less than 12 stores in China - starting out slow was also its guide. A few Chinese items have been added to the menu, and a 'Chicky' mascot proved much more effective than Col. Sanders (viewed as a stern grandfather figure), especially with children. The firm focused on premier locations near tourists, partly because advertising was practically non-existent. While meal costs are less than comparable U.S. offerings, so are costs - overall meals are about 3-4X as profitable as in the U.S.
Avon went to China in 1990. Struggling in the U.S. (women had growing opportunities), and targeted at the middle-class here, its initial 1,000 Chinese representatives were highly educated and skilled (they lacked alternative opportunities). One of its first was a 40-year-old pediatrician earning $120/month. Working part-time, she soon sold $5,000 in products, pocketed $1,500, and thought of going to Avon full-time. Avon also boosted its success by tailoring products to the tastes of local women, and producing them in China as well. However, the Chinese government was suspicious of multi-level sales arrangements (fear of high prices and Ponzi-schemes) and disliked the large-meeting recruiting drives (feared anti-government activities). Direct sales were then banned in 1998. Avon switched to retail sales and continued to do well. In 2006, the government allowed direct sales to resume.
Trade deficits are a sensitive problem in a number of nations. The topic is acerbated by unclarity of statistics. Assembling a G.E. appliance in a Chinese factory it owns is not likely to be classified as an import when the product arrives in Long Beach. However, if the same product had been outsourced to a Chinese company and produced on the mainland, it would be classified as an import upon arriving here. (Thus, our trade deficit is understated; this may partly explain why it has grown so fast. Other reasons include a preoccupation with terrorism and Iraq.)
Karabell claims that one reason Chinese leaders have been so adamant about not allowing China's currency to trade freely is they believe this would lead to a collapse of the currency as in Russia during the early 1990s. The problem centers around concerns over the large proportion of non-performing Chinese bank loans. However, Karabell's explanation of the link was unclear and ineffectual. Meanwhile, the Chinese government is working to 'clean-up' the problem.
By 2007, more than 400 of the S&P 500 derived 40%+ of their profits from outside the U.S. International sales also are faster growing. (Karabell doesn't explain whether this is from sales to outside nations, or profit allocations to offshored work.)
"Superfusion" ends with Karabell recounting Britain's need for large loans after WWII. The U.S. took advantage of the situation and required Britain to open up its empire to trade, thus ending the British Empire and forcing it to take a backseat vs. the U.S. Karabell believes the same may happen to the U.S. vs. China, and recommends we re-orient ourselves away from current military and security challenges (eg. Given their intertwined economies, do Japan and Taiwan need the U.S. Navy's 7th Fleet in the Pacific to protect them from China?) to a greater economic focus, and working closer with China. (Despite Karabell's excellent material, I still believe we need to restrict free trade with China.)
Outstanding Overview November 17, 2009
Barbara Barone (Phoenix, AZ, US)
5 out of 6 found this review helpful
Zachary Karabell's book,"Superfusion", is a stunningly blunt but realistic assessment of America's current position in the global economy as well as China's ascendancy. There are several important themes that emerge from his book.
While practicing their own version of American capitalism, the Chinese are succeeding in transforming their economy and society to achieve a level of economic stability and potential economic hegemony. There are myriad political implications.
Meanwhile, the United States, the epicenter of capitalism, seems to have abandoned the spirit of the capitalist construct. Turning inward and decrying free trade, behaving in a reactive fashion to the recent global economic crisis; if continued, these behaviors do not bode well for our relative economic position. We are in danger of not only looking askance at the Chinese but looking away from our own political and economic shortcomings.
The nation-state model and the impetus to maintain economic and political sovreignty at all costs is perhaps outmoded. It seems counterintuitive to the inevitable dynamic of globalization and all the complexities that implies. Political and business leaders at every level must recognize that it's a small planet replete with competing ideologies and political and economic constructs. Capitalism, however implemented, will allow civil societies around the globe to flourish.
Chimerica is a phenonmenon that developed over the last 20 years. Both the United States and China were largely unaware that it was happening, much less the "unintended consequences" of the relationship. Zachary Karabell's book is an informative history of this phenomenon and a call for better understanding of our intertwinement. It is a call we must heed.
Barbara Barone
Phoenix AZ
Zach Karabell's Superfusion Nails It October 25, 2009
John Thomas (San Francisco, CA)
5 out of 7 found this review helpful
Zachary Karabell, president of River Twice Research, is one of the few original thinkers out there who also has a sense of humor. So there's more than one? Zach has brought his considerable talents to bear on the current state of the Chinese-American relationship in a new book, Superfusion: How China and American became One Economy and Why the World's Prosperity Depends On It. International trade has fused the two countries into a single economic unit that accounts for a quarter of the world's population and a third of its GDP, despite wildly different cultures, much like the loose confederation that makes up the European Community. The Middle Kingdom now has reserves of $2.3 trillion, which is overwhelmingly invested in the US. Where else can it go? That enabled them to step up and play an important role in the bail out of the US financial system this year. But it is an imbalanced agglomeration, with Americans over consuming and under saving and the Chinese doing the reverse. This has to stop, lest the symbiotic relationship tears itself apart. The tit for tat, storm in a tea cup, where the US imposed punitive import duties on Chinese tires and the they retaliated with a ban on American chicken feet (yes, they eat them, yuk!), is a recent example. The reality is that old, boring industries that once might have fought tooth and nail for protection are now migrating to China en masse and finding new life. Bet you didn't know that General Motors sells more cars in China than in the US, some 1.6 million this year? Don't hold your breath waiting for China to float the Yuan, as it is one of the few tools that give the Mandarins in Beijing direct control of a huge, disparate economy. Chinese military spending is so parsimonious that it won't remotely comprise a threat to the US. What little they have is directed at potential regional aggressors, like Japan, India, and Russia. The greatest risk to the existing relationship is that Chinese growth continues so rapid, that it pits them against the world in resource bidding wars, which could get ugly. With crude at $82 and copper at $3, has that already started? The book is well worth a read for some excellent "out of the box" analysis. Does anyone have any good recipes for chicken feet?
Showing reviews 1-5 of 7
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