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

Honestly, I hope the US

[Em Emalb]

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.

Re:Honestly, I hope the US

[senorbum]

Hmm, its a nice apocalypse theory but has really nothing to back it. The US dollar is no where near hyper-inflation. If you knew anything about Bernanke you would recognize that he is extremely anti-inflation and has been well before he took his current roll. Over spending is only a small issue in regards to the deficit. The current shortfall is due to a loss of Tax Dollars, not due to a major increase in spending. The U.S. Dollar is stronger today than it has been in a while. There is no magical 'pending socio-political-economic collapse' just waiting around the corner. If you haven't paid any attention to any of the jobs reports, in 1.5 years we went from losing 800k+ jobs per month to gaining 50-200k non-gov't jobs per month. And if you read the recent jobs reports at all you would have seen that wages increased and hours/week increased. Plus, productivity is finally flattening out which means that employers will be forced to hire new people since they can't get any more extra work out of their current people.

Re:Honestly, I hope the US

[bmajik]

No.

He's an opportunist dipshit, I don't watch TV, and everytime you dismiss someone -- based solely on who you surmise them to be a proxy of -- you escalate the problems that are complict in the undoing of America.

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.

Re:China Wins Big no matter what

[Joey Vegetables]

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.

Re:China Wins Big no matter what

[Troggie87]

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...

Re:The next chinese will be robots

[NJRoadfan]

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.