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Where Will Your Next Gadget Be Made?
hackingbear writes "The New York Times is warning of the possibility of price inflation for gadgets, cars, and many other items, not from our skyrocketing government debt, but rather the increasing cost of doing business in China. Coastal factories are raising salaries, local governments are hiking minimum wage standards, and if China allows its currency, the renminbi, to appreciate against the US dollar later this year, the cost of manufacturing in China will almost certainly rise. (The report missed the biggest cost factors in China — electric and water utility costs.) 'For a long time, China has been the anchor of global disinflation,' said Dong Tao, an economist at Credit Suisse. 'But this may be the beginning of the end of an era.' The shift was dramatized Sunday, when Foxconn, the maker of the iPhone and everything else, said that within three months it would double the salaries (rather than the rumored 20% increase) of many of its assembly line workers."
"And last week, the Japanese auto maker Honda said it had agreed to give about 1,900 workers at one of its plants in southern China raises of between 24 and 32% in the hopes of ending a two-week-long strike, according to people briefed on the agreement. However, while big and famous manufacturers, like those in the US and Europe, may worry about their PR images and give in to labor demands, it is unclear if thousands of smaller ones will follow. And given the millions of people waiting for work in other countries, from India to Vietnam, the only thing that may have changed is the prevalence of Made in China labels of your gadgets."
Since I live here in the US, I'd really like to see a return to the US for manufacturing. We're still teetering on the brink, don't let day to day market-droid speak fool you.
The US is not anywhere near out of the woods yet.
So...I'd like to see my next gadget have "Assembled/Made in the USA" on it.
Just as I'd suspect anyone from another country would prefer their country to be the country of assembly for their next gadget.
Sent from your iPad.
Anyone remember "Made in Japan"? Then "Made in Taiwan"? Now, "Made in China". Manufacturing moves to the cheapest location. This is how globalization works, for better or worse. If China becomes too expensive, somewhere else will arise to take up the slack and open near-slave labor factories.
Hopefully, this results in a rise in living conditions for everyone - My personal pessimism has doubts.
It's been said, a pair of $75 nike's would cost $300 if made by americans.
Those $75 Nikes have quite a markup. They could be made and sold here for around that price, but Nike's profit margin would suffer. There are shoes still made in the USA, and they are affordable.
While your point is valid overall, I would point out that the definition of "middle class" in China or any developing country is not the same as in the West. The whole structure of production and prices of available goods and costs of living is wildly different. For instance, middle-class workers in China or India are very unlikely to be able to afford two cars, a huge house in the suburbs, and wide screen TVs in every room. On the other hand they are much more likely than we are to be able to afford nannys, maids, drivers, etc., because the cost of domestic labor is much cheaper there compared to here. These differences make it very difficult to compare purchasing power, especially when currency exchange rates, interest rates, and labor costs are not allowed to clear in most countries for political reasons.
Nonaggression works!
Nationalistic bickering aside, this is very good news. As living standards rise around the globe, labor will get more expensive, sure, and our iPods might cost 20% more or something, and in return, human beings on the other side of the planet have food on their table and work to do. It's good for the world that labor in china is getting more expensive in every way except the most short-term "I want my shit cheap right now" way.
We are not going to be able to bully China into submission like we are used to doing around the world. How about if we start trading with her and learning to respect their culture? That doesn't mean ignoring human rights abuses, but it means respectful engagement.
Currently hooked on AMP
Well, they are going to be using a lot more resources - eating more meat, driving more cars, more precious metals, all that good stuff. Energy costs will soar when the global economy recovers. But don't get me wrong, I can hardly complain when their consumption is on average still a fraction of mine. And maybe their armies of engineers will figure out a post-fossil-fuel economy.
The idea that China is anywhere near the United States in development is largely propaganda. There are huge, frightening issues that the Chinese know about and are trying desperately to fix, all the while trying to come off as a superpower.
Take, for example, agriculture. Chinese agriculture is a hundred years behind the United States, and not just because they can't afford to upgrade. The government forces manual labor simply to try and keep living inland viable. Were they to mechanize the labor needs of the central part of the nation would plummet, and massive migrations to coastal areas would take place: coastal areas that are already largely squalid pits. This has been commented on off the record by Chinese officials, but they would never openly admit it.
Infrastructure in China is hugely underdeveloped, to the point where the government there is raping local ecosystems in a desperate attempt to keep up with growth. The United States did the same thing, though spread over a longer period and with 1/5 the population. This will catch up with them in the not-too-distant future, and there will be hell to pay.
Then there is the problem of population imbalance. Most of us know about the "one child" restriction many Chinese are under. Most of those children born are boys, for cultural reasons. The male/female gap in China is in the tens of millions. And those young men are just reaching relationship age. What happens when 50 million men realize it is mathematically impossible to have a family? Talk about a social experiment.
Combine these with the typical problems associated with repressive governments, and we have ourselves an interesting pot of instability. The "growing middle class" is just the cream floating on top of a vat of very rotten milk, and I suspect we are going to see just how unsavory it is in not too long. I'd say India is far more likely to become a power than China, if we were betting. Though in reality, we might be looking at a superpower-less world in the near future...