For his new book "China, INC" (Scribner, 352 pp., $26), author Ted Fishman traveled four months in China and nearly a year in Japan, Germany and the United States, to get to the bottom of the Chinese economic miracle, a spectacular, 30-year transformation from a county of peasants to a rising manufacture market superpower.

The book offers a multitude of statistics, case studies and anecdotes to tell how the Chinese catapulted themselves onto the world stage, how they remain highly competitive, and what effect this has on U.S. companies and consumers.

Fishman recently testified before the China Caucus, a congressional committee established only to discuss the implications of China's rapid economic, political and military growth. United Press International spoke to Fishman Thursday.

UPI. First of all: Is China really a threat?

Fishman. It's a threat and an opportunity. Right now, China's economy is significantly smaller than that of the United States; our manufacturing sector is larger than all of China's economy.

The economy of the Chicago area is one-fifth of China's national economy. Yet, China is growing fast and will almost inevitably be the world's top manufacturing country (in terms of volume of goods).

It's moving up the economic food chain very rapidly -- it will become a destination for low-cost manufacturing, but at the same time, it makes high-value goods.

Q. You argue in your book that the Chinese economy is actually larger than the country's official numbers indicate. Please explain.

A. Well, for one thing, a dollar's worth of Chinese money buys about six times more than a dollar can buy in the U.S. or elsewhere in the industrialized world. So it's common for analysts to describe China's economy in terms of what the Chinese people can buy, and that makes China's gross domestic product look several times bigger.

Also, there is some dubious quality to the national numbers which collects data from China's provinces. Since provinces win money from the central government based on how well they can show they are poor, rather than prosperous, there is a strong incentive to underreport growth.

And, of course, that is to say nothing of China's vast underground economy, which official numbers don't reflect.

Q. Fifteen years ago, hardly anybody talked about China as an economic competitor to the global superpower United States. All of a sudden, China is portrayed as a looming economic giant. What has caused this change?

A. It has been the vast and diverse boom in Chinese enterprises. China now has 85 million private businesses, more than any other country in the world. The scope of those enterprises is very broad and increasingly global.

And the Chinese government has had two great successes in their economic planning. The first is in how it allowed the private sector and free, or better yet, "freer" economy to develop.

Long before reform came officially, China's farmers were finding ways to grow their own crops and to circumvent the system in which the government was meant to own all property, all means of production and to control the sale of everything.

Deng Xiaoping (the late Chinese leader who opened his country to the world while keeping the Communist Party's grip on power) recognized that these efforts could help the country growth and relieve the Communist Party of some of its burdens in supporting the people economically.

At first, through careful experiment, the efforts of farmers were legitimized, and then urban areas were allowed their own segues into a more market-driven economy. Of course -- once things started taking off -- the Chinese government, along with many provincial governments, focused very intently on improving China's industrial infrastructure.

They also invited in foreign businesses, which have helped finance China's economic miracle with hundreds of billion in new investments.

Q. You argue that other countries will increasingly use China to diminish U.S. power. Can you elaborate on that?

A. Countries use China to triangulate against the United States, seeing China's power and the breadth of its influence as growing and an increasingly powerful counterweight to U.S. power. As China grows economically, it will have a much more geopolitical agenda, and much more influence in the region.

So far, there is only one superpower in the pacific, and that's the United States. That will change. China will have regional priority. But that has happened throughout history before. Countries follow up their economic growth with a growth in political power.

Q. That economic growth also came with the help of a large counterfeit market. Experts say China is stealing 90 percent of its technology.

A. China has made a decision that it is not interested in policing intellectual property rules that would protect the patented, copyrighted and trademarked goods of foreign companies in China. This position allows rampant piracy of foreign consumer goods and entertainment items, and also the copying of valuable industrial processes, making it something like the great industrial subsidy in the world. Incidentally, it costs the Chinese government nothing.

Q. Should the U.S. administration pressure China harder to crack down on piracy?

A. We should pressure China as much as we can. What I propose in my book is something like a compliance regime - similar to what has already happened in the garment industry - where U.S. companies inspect their Chinese suppliers that they are not using pirated technology.

But we also have to start thinking about finding solutions for the problems at home. That means we need to make sure our labor force has the best skills of any in the world and is made of highly creative workers.

Q. Should U.S. companies pull out of China if it becomes too much of an economic threat?

A. No. That's part of the global competitive dynamic that we have to participate in. And at this point, it's probably impossible to pull out. Wal-Mart has 8,000 factories in China that it does direct business with.

General Electric, Ford, General Motors and Motorola all have multibillion dollar investments in China. There have been huge savings for U.S. consumers due to this relationship. I am actually in favor of deepening relations with China, as long as it happens under fair trade rules under which both countries can remain competitive and prosper.

Q. What about the Chinese currency manipulation? Does it benefit or hurt China?

A. We may be very sorry for what we have wished for with China's currency. If the yuan has a radical spike in value it will force up the price of world commodities, force up U.S. interest rates and make consumer goods more expensive. The current regime over China's currency now subsidizes American consumers, at the expense of Chinese consumers. It's a bargain for us and a hardship for them.

Q. What has surprised you most when researching in China?

A. I found a natural affinity between both people. We share an openness, a sense of fun and a willingness to work very hard to make deals pay off. The Chinese also revere manufacturing, so when American engineers or others in manufacturing find themselves in China, they too are respected in ways they might not be at home.

Walking into a party in China with a manufacturer's credential is like showing off six-pack abs in the United States. It's sexy, and Americans who do business there like that kind of admiration and respect.

If we are cooperative and take measures that help both countries thrive and grow richer, the relationship between the two countries will reflect this mutual affection.

Q. Will China continue to grow? Or will the bubble burst?

A. All economies have short-term setbacks. The United States is no exception, by the way. But the U.S. standard of living has gone up 30-fold in the last decade. Market reform is here in China, and in the long run, its people will thrive as America has thrived, despite wars, political conflict, depressions, and everything else that can get in the way of progress.

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