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."

Comments

China Wins Big no matter what

[tekrat]

The Chinese are in a wonderful and unique position to take over as the number one superpower and number one consumer of goods, turning the USA into a number 2 or 3 within a few years. Let's start off with the fact that China now has a "middle class" of fairly affluent working class people that is over 300 million strong.

Let me repeat that in case you missed it: Their middle class is as large (or larger) than the entire population of the USA. This middle class is buying. China can now self-sustain. In other words, there are enough people now in China with the money to buy stuff made in China.

So, we, the USA, need the Chinese more than than China needs the USA. Furthermore, the Chinese are smart enough to both "outsource" to cheaper countries than themselves, while acting as middle-men to their USA 'bosses', and while we will eventually get around to cutting them out (as we did to Japan), it will be too late by then, China will be selling in the USA directly (as the Japanese do, with established brands), and, as I said, they can self-sustain.

China, however, may "import" slave-labor (or nearly so, within boundaries of international law), allowing the Chinese a more relaxed lifestyle while imported workers do the grunt work for low wages. This will allow them to keep prices low and maintain their existing infrastructure of factories.

We just need to be careful though that *we* aren't the slave labor they decide to import.