The End of Cheap Chinese Labor July 9, 2010
Posted by Michael in Economics.trackback
SHANGHAI (AP) — Factory workers demanding better wages and working conditions are hastening the eventual end of an era of cheap costs that helped make southern coastal China the world’s factory floor.
A series of strikes over the past two months have been a rude wakeup call for the many foreign companies that depend on China’s low costs to compete overseas, from makers of Christmas trees to manufacturers of gadgets like the iPad.
Where once low-tech factories and scant wages were welcomed in a China eager to escape isolation and poverty, workers are now demanding a bigger share of the profits. The government, meanwhile, is pushing foreign companies to make investments in areas it believes will create greater wealth for China, like high technology.
Many companies are striving to stay profitable by shifting factories to cheaper areas farther inland or to other developing countries, and a few are even resuming production in the West.
Hmm, somebody here at IB told Geoff a long time ago that the Chinese export-driven economy is really not so much of a threat to America. It is based on artificial exchange rates. Their military build-up is dependent on a balance of trade surplus that can’t be maintained.
They are also facing the demographic decline of an aging population, crippling environmental issues, an underdeveloped and very poor internal market, and political instability.
Who said stuff like that?
*scratches head*
Oh yeah, that was me.
“China is going to go through a very dramatic period. The big companies are starting to exit. We all see the writing on the wall,” said Rick Goodwin, a China trade veteran of 22 years, whose company links foreign buyers with Chinese suppliers.
“I have 15 major clients. My job is to give the best advice I can give. I tell it like it is. I tell them, put your helmet on, it’s going to get ugly,” said Goodwin, who says dissatisfied workers and hard-to-predict exchange rates are his top worries.
It’s all about the exchange rate for the yuan.
Sure, the Chinese can stage the most impressive military parade on the planet, featuring some pretty hot women showing legs and wearing sexy stompy boots:
So, that video raises an issue, and I want your opinion.
But, you just cannot defy economic reality indefinitely. The short term benefits of artificial exchange rates and too much foreign debt will catch up with you.
Beijing’s decision to stop tethering the Chinese currency to the U.S. dollar, allowing it to appreciate and thus boosting costs in yuan, has multiplied the uncertainty for companies already struggling with meager profit margins.
In an about-face mocked on “The Daily Show with Jon Stewart,” Wham-O, the company that created the Hula-Hoop and Slip ‘n Slide, decided to bring half of its Frisbee production and some production of its other products back to the U.S.
At the other end of the scale, some in research-intensive sectors such as pharmaceutical, biotech and other life sciences companies are also reconsidering China for a range of reasons, including costs and incentives being offered in other countries.
“Life sciences companies have shifted some production back to the U.S. from China. In some cases, the U.S. was becoming cheaper,” said Sean Correll, director of consulting services for Burlington, Mass.-based Emptoris.
via Companies brace for end of cheap made-in-China era – Yahoo! Finance.
*smacks Michael with a newspaper for missing the obvious joke*
As far as your poll goes, I’ll take one of each. Chinese women are like Chinese food: After you have one, and hour later you’re hungry for another one.
And I remember hearing Rush talk about this sort of thing several years ago. He said that the best way we could keep China from overwhelming us economically would be to do our best to export capitalism AND the union ethic to China.
China is a house of cards. No, that’s a bad analogy…because I have yet to see a house of cards soaked with gasoline and with nuclear weaponry on the table. When China goes, it will make the overthrow of the Ceaucescu regime in Romania look like an election for the Alabama Agricultural Commissioner by comparison. The Chinese government has always been cavalier about in-house casualties, but they’ll need to kill tens of MILLIONS of their people this time in order to short-circuit this upcoming revolt; and with access to information what it is now compared to the Cultural Revolution era, that will be damn hard to do in secret.
I call shenanegans on the poll. Sure you may attempt to hit one of those Chineesettes or whatevah, but just as you do, they’d block it, grab your arm, flip you over through a table, then say something in that moongod language they speak.
Trying to score with the ladies is a bit more difficult when you’re trying to put your bones back inside the skin.
d3ft, you don’t know how to score with the Chinese ladies because you don’t have the manual. It’s all covered in The Lutheran Man’s Guide To Charming Non-Lutheran Hos, which is only available to members.
Is there a manual for Lutheran Hos?
Or is that like saying the ocean is moist?
We’ll see. Those Chinese are inscrutable, you know.
Boring, copycats. Lousy music.
Irritating, high-pitched nasal voices.
I’d hit anyone of em… with my fist.
Lucky for them they’re half-way around the world.
*O.K.I. keed… They’re cute. Music is still lousy.*
Just look at those wide streets. Everybody in China must own 3 cars.
I’d like to compare this situation to my horse crap post from a while back. The central joke (other than constantly comparing eco-science to horse crap) was that it assumed contrary to evidence and common sense that trends continue. The Simpsons made the same joke once, with Disco Stu trying to convince Marge to invest in disco music, based on a chart showing disco album sales between 1977 and 1979.
Sure, if you assume that trends continue, the entire U.S. should be knee-deep in horse crap, and we should all be wearing lavender jumpsuits, instead of just BrewFan. In the former case, technology and consumer patterns changed. In the latter, tastes changed (again, other than BrewFan’s).
Sure, China’s current situation is completely unsustainable. If we assume that current trends continue, the entire nation and region will implode spectacularly. But I don’t assume that, because those inscrutable Chinese will react to conditions, just like non-BrewFan-Americans reacted to the advent of glam rock in the early 80s. The reaction may be massive blood-letting (that’s probably a pretty safe bet), but it could be any number of other things. And we can’t predict it, because even if it were clear what the optimum solution is (and it’s not), and that the Chinese government would want the optimum solution (they don’t, necessarily), there’s no reason to believe they would act rationally to achieve it, for the simple reason that humans are not rational actors. See e.g. BrewFan.
The most you can say is that something’s gotta give. Sure. But predicting that nations, people, geopolitics and the balance of power will change is not exactly prophecy. What will give, how it will give, and the end result are utterly unpredictable.
The question you’ve got to ask yourself, besides DYFLPWDY*, is whether you think our politicians, State Department, and foreign policy are smarter than China’s politicians, State Department, and foreign policy. Har.
*Do You Feel Lucky Punk, Well Do Ya?
*looks in mirror to check for ‘Kick Me’ sign taped to back*
I forgot to mention that China’s real estate market is in bubble mode, even worse than the U.S. four years ago, and is about to collapse.
Also, China has a huge obstacle that separates it from its customers.
It’s called the Pacific Ocean.
Shipping costs matter. Our natural source for cheap labor is Mexico.
>> We’ll see. Those Chinese are inscrutable, you know.
HAHAHAHAHAHAHAHA. I’m dyin
I think Geoff knows my uncle that used to look you in the eye and say “perhaps you’re right”.
I wonder what percentage of the Chinese manufacturing capabilities are tied up in making black, red and white parade uniforms?
Michael, the Lutheran Man’s Guide To Charming Non-Lutheran Hos was published as a recruitment tool, NOT as a guide to assist in ‘scoring’.
Please self-refer to your Church Council for rehabilitation, and bring your copy of the Guide with you.
Lutherns didn’t have the balls to take on China. They got beat up by a little girl named Lottie Moon.
If US convinces China to allow UAW and SEIU in every factory that exports to US, the Chinese economy will quickly turn into rustbelt.
I think Geoff knows my uncle that used to look you in the eye and say “perhaps you’re right”.
I always used to say “you’ve got a point.” But people eventually learned that whenever I said it and/or was rubbing my chin, I thought the person I was talking to was full of it. So I had to train myself out of both habits.
At least I think I managed to train myself out of both habits.
But see, that’s the point.
It’s beautiful. And polite. When my uncle, who never had a bad word to say about anyone, looked at you and said “perhaps you’re right”, it was … it was awesome.
But see, that’s the point.
*eyes Dave suspiciously*
Don’t let these guys bother you Brewfan, it’s all just Pre-Destination Envy. You’re like the rich guy who lives in the big house on the top of the hill, or in this case the pre-destined to be eternally rich guy for whom God is at this moment preparing an awesome Heavenly crib for, and they just can’t stand it.
(Or perhaps they are right)
A little coke and a really hot Brazilian hooker — Brewfan is gone to hell.
But, God won’t let that happen. Brewfan is going to go fishing for his thrills, and play with his grandchildren for ordinary fun.
That is the Doctrine of Election in action.
I begin my missions trip in 5 days. I am going to convert every Luthern I meet to Christianity.
*note to self: Don’t forget to buy and pack several copies of The Westminster Confession of Faith for Dummies*
I am going to convert every Luthern I meet to Christianity.
Lutherns are into food.
Put cream of mushroom soup and lime jello on that shopping list.
hahaha! Cathy, if you want to know the truth even Calvinists love a good tuna casserole!