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The Emerging Mountains Are Calling

Do you know how a sandwich maker can turn into an investment statistic of global proportions?

May 29, 2000

Do you know how a sandwich maker can turn into an investment statistic of global proportions?

For several years, we had a small sandwich shop on the ground floor of our office building. The shop — run by two generations of an immigrant family from Asia — churned out a steady supply of roast beef, tuna salad and grilled vegetable sandwiches. Placing an order could sometimes present a language problem. But there was no denying that this was a family working hard to make the shop a success.

Then one day, the shop was suddenly locked up and the family gone. The only clue left behind was a hand-written note from the family patriarch taped to the front window. “Dear Customers,” it read, “Thank you very much for your business. I have decided to move back to my family’s original home area in rural China.”

“I am now the President of the Huang Sang Mountains Industrial Works. Unfortunately, the commute is just too far to keep running the sandwich shop, too. So I regret to tell you: we won’t be back.”

Of course, he may not have realized that, by trading the profits from his sandwich shop back in the United States for a factory in re-emerging China, he had just played a small role in the current economic debate.

How so? When our sandwich maker took his family back home to China, all of the dollars that he and his family took with them — as small a sum as it might have been — were counted as a “unilateral transfer” from the United States to China.”Unilateral transfers” are those entries in the U.S. balance of payments which reflect the amount of money individuals, organizations and the U.S. government send abroad each year — without expecting something in return. Hence the word “unilateral” transfer.

But if you think that official aid by the U.S. government makes up the biggest chunk of this international capital flow — you are wrong. Of the more than $46 billion in unilateral transfers in 1999, official aid by Uncle Sam accounted for only about one-third. In contrast, private remittances — just like the one by our Chinese sandwich entrepreneur — reached a total of almost $30 billion.

Which goes to show that private individuals can go a long way toward providing urgently needed capital to help developing countries. In his own small way, our shopkeeper-turned-industrialist has done his part to help China develop into a modern, free-market economy.