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The End of Cheap Labor In China
hackingbear writes "In the past decade, real wages for manufacturing workers in China have grown nearly 12% per year. The hourly cost advantage, while still significant [comparing to the West], is shrinking rapidly. The changing economics of Made in China will benefit both the rich and poor world. Countries like Cambodia, Laos, India and Vietnam are picking up some of the cheapest labor manufacturing left by the Chinese. And there is already evidence of at least the beginning of a shift in manufacturing operations returning to the US. Perhaps we will soon stop picking at 'Made in China' but instead complaining 'Made in Vietnam/Cambodia,' while serving the flood of Chinese tourists stocking up on brand-name merchandises on US tours and Chinese students paying high tuitions to our cash-strapped universities."
China is not centrally planned? There is no way you can be serious... check NDRC
People move from subsistence farming to factory work, capital investment raises their marginal productivity, employers have to compete for workers, and wages rise. It's the same thing that happened in England and the United States in the late 1800s and early 1900s.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
"The changing economics of Made in China will benefit both the rich and poor world."
It won't help the U.S! We keep demanding cheap goods, no matter how poorly made they are, and the only way to get that is to take advantage of poorer countries and manufacture overseas. Of course, that means there are no manufacturing jobs anywhere in the country, so in another few years, the only place in the U.S. where anyone will be able to shop or work will be Walmart.
On the one hand, you have the iPhone--built in China and it's an absolute miracle of modern technology. Have you SEEN one of those things on the inside? Rows and rows of tiny little dots on a board and I can't even guess what any of it does. I'm sure, given U.S. labor costs, it would cost a lot more than it currently does.
On the other hand, I don't know where to buy decent clothes. I bought a 12-pack of socks a couple weeks ago and three of them were mis-sewn. Every time my wife buys a 3-pack of underwear for the kid, she takes them out of the package, washes them, and 1 or 2 will come out of the washer--their first wash, having never been worn--with the waistline frayed.
I'm not saying that everything that is (or was) made in America is automatically great, but wouldn't it be great if people DID give a shit about the quality of what they made, and that the money would stay within our borders? But I think the opportunity to do good has passed. I saw Schmatta a few months ago and that, too, is depressing as hell. It's the story of New York's fabled garment district and it ends with some fun stats: 40 years ago, 95% of clothing sold in America was made here. Today, 5% is.
The only thing America has now is an entertainment industry and bullshit I.P. laws. Oh yeah, and prisons and wars. And a bailed-out, fucked-up auto industry that somehow managed to learn almost NOTHING after they started loosing their asses in the 80s. (They started to regain their composure a bit in the 90s but then they just started making SUVs.)
Maybe I've seen Jerry McGuire too many times but I really would be happy owning fewer things that held together better and I would be more than happy to pay more for that. My parents bought a microwave within a few years of when they first became common (early/mid-80s) and it has been replaced exactly once, and that replacement is still in use. Sure, new ones cost less than $100 at Walmart now, but I've bought 3 or 4 since buying my house in the late 90s. I don't care if it costs less overall to live like this--money isn't everything. The Great Pacific Garbage Patch should make anyone stop and think "hmm, maybe rampant consumerism isn't the way to go."
PS: we also, as a country, need to stop looking down on blue-collar work. Not everyone needs a college degree. We really need to have trade schools at the high school and college levels.
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Let's see China pull this off without constantly manipulating their currency to boost the manufacturing while keeping pollution half of what it is currently over those same 10 years. It's okay, because when inflation hits, the sh*t will hit the fan in China (look up the economic trilemma and see where China's weakness is... for the USA, we choose not to peg our currency to fix our trade gap).
I have never let my schooling interfere with my education.
People who oppose globalization should really think about this. In a couple of decades, the globalized economy has elevated a nation of a billion people from the bottom rung of world socioeconomic status to the solid middle ground. No question, the elevation of China has had some negative impacts on the economy of the developed world, but not so bad, really: the US economy has not collapsed during the process, and its manufacturing industry has been weakened but survives. No question, the process has had some negative impacts on Chinese workers, but nothing compared to the servitude, abuse, and death of the West's own industrial revolution. And finally, no question that political freedoms in China have not changed with the economic times, but I consider the *ability* to communicate a prerequisite to the *freedom* to speak, and the Chinese government may soon realize it has a tiger by the tail in that regard.
And consider on the other hand, the positives. A billion people are now able to live in comfortable housing, free of disease and pestilence, able to travel across the continent and participate in global dialogue. A good chunk of these billion people are now in a position to buy US-made products like World of Warcraft, Ford Explorers, and a million things made in China, but designed in the US by 3M, IBM, and Microsoft.
A rising tide may not lift all boats, and it surely doesn't lift all boats equally, but still, a billion boats is a damned good start.
Have you actually been there? (I just got back.) Shanghai is an interesting place, that's for sure. Wages for university educated and skilled people there are rising quickly. (You can't use unskilled farmers as programmers.) At the present rate of growth, they will match North American wages for equivalent work in about 4 to 5 years. Now I'm perfectly prepared to entertain arguments that the present rate of growth is unsustainable, so lay them on me... (And explain how they won't also depress wages here.)
Ian Ameline
'nuff said.
China will simply move the cheap manufacturing to Africa.
You don't think china's been buddying up with East African nations for nothing do you? They've had a military medial ship there for six months late last year spreading China's good will.
China is not dumb, not in the slightest, they've been preparing for the growth of their economy for at least a decade and manufacturing will not start to move for at least another decade, China intends to branch into the more advanced side of manufacturing such as aircraft and high tech. Much the same as Japan and Taiwan did, when I was a lad, "made in Taiwan" was not a symbol of quality, now days Taiwan makes some of the highest quality electronics in Asia (along with Korea and Japan) so why can't China do the same thing? Unlike the other poor Asian nations such as Thailand or the Philipines, China does not have a incompetent leadership mired in corruption.
So chances are, in 15 years we'll still be buying Huawei modems, except they will have "made in Tanzania" written on the side.
Calling someone a "hater" only means you can not rationally rebut their argument.
A once-proud nation with a free and well-functioning economy is reduced to a pathetic mess, with a small number of very wealthy individuals and a huge masses of the poor.
I was having trouble deciding whether to mod jcr up or reply to this braindeadedness.
Huge masses of poor? In the US? The only way you can come to that conclusion is if you don't even know what poor is. I don't need to show you, but this is poverty. In America, homeless people are fat, and the only reason they are homeless is because they have serious mental or emotional issues.
In America, we have 'poor' people, as measured by the poverty line, but the poor people have refrigerators. They frequently have cars. They definitely have shoes. I'm not saying that everything is perfect here, or that there aren't people who have money problems (the primary problem people will run into in that case is healthcare), but in America, we have it good. If you don't think so, you really need to get out of the country and see the world.
"First they came for the slanderers and i said nothing."
If you think there's no difference between a regulated market and central planning, I invite you live in a Chinese ghost city for a little while.
Once you get out of South Africa and Egypt there is no infrastructure for manufacturing in Africa. Even with 15-25 years of solid investment and construction, there won't be infrastructure for manufacturing in Africa outside of Egypt and South Africa.
China isn't investing in the Republic of South Africa or Egypt, they are investing in places they can strip bare of mineral wealth.
Wishful thinking much? Western economists have been predicting the death of China since the mid 90's. Everything from over heating to under heating, from over population to declining population have been bandied out as the potential causes. There is also blaming China for oil price spikes when it was American speculators who was manipulating the markets. If I am an American, I would not be rejoicing at this news. It means that China is maturing and moving up the tech tree. China also has an advantage that the US doesn't: an autocratic oligarchy, the best form of capitalist governance.
Move to Cambodia, or Vietnam, or Thailand or Laos and their economies will also grow and you'll see their currency appreciate in value as well, leading to the same issue. In the mean time you'll need to live with greatly reduced infrastructure and shipping capacity as compared to China.
And yes, I do a lot of work in Asia, and live half my life in Shanghai supporting manufacturing in China, Thailand, and Vietnam.
Browsing at +1 - no ACs, I ignore their posts. So refreshing!
China's interests in Africa are natural resource related. As other posters said already.
Secondly, Africa has a simple reason that it does not develop well economically: no political stability. Say what you want about the Chinese government, at least it's a fairly stable, safe and thus predictable environment to work in, and that's all businesses need. You do not need your own private army to protect your business, like you do in many African countries. There are no people walking around the streets with an AK47 over the shoulder.
Africa, as it stands, has no proper infrastructure, no stable government, corruption issues that are far worse than China's, and so on. It's just not an easy environment for businesses. And yes I know I'm generalising here, there are countries in Africa that have a working government.
Incidently, this morning I just read about problems for textile factories. There is talk about a cut in the VAT rebate they can get from 15% to 11% on exports (they have to pay 16% VAT - so effectively their VAT goes up from 1% to 5%). A large number of factories has indicated they would probably close, as they lose competitiveness. Wages go up, the Yuan goes up, raw material prices are high. And that wages go up is not as much a result of improved productivity, it's more a result of labour shortages. There are currently huge labour shortages in China, especially the coastal regions. And that's what's driving up wages most.
Furthermore they mentioned the next destination is probably not Africa, but, surprisingly, Europe. At this moment production costs in Romania are already lower than in China. Add to that the obvious advantages of sitting closer to your market, I wouldn't be surprised if very soon more European producers will set up shop there.
Other Asian countries indeed seem more likely candidates, but with few exceptions infrastructure is a major issue. Indonesia for example only has a few short stretches of highway around their capital, making transport slow. They also don't have any main ports, and are limited to feeders and shipping via other ports such as Singapore. Vietnam is in slightly better shape, Bangladesh is a total mess.
And about moving up the ladder: you're absolutely right. The government wants it, but it's going to take a long time. Other than heavily government supported industry (you mention airliners already, don't forget railways: the US is shopping in China for high-speed rail technology already) there is not much happening as yet. It is still Taiwan that's doing development, design and marketing, Hong Kong that's doing finance and logistics, and China that's doing manufacturing. Not much new coming out of China yet, they're still in the "copy" stage, and a lot of quality that comes out is poor at best. It's very much time they move on to the "copy-and-improve" stage but I haven't seen this really happening yet.
The US is at 10% unemployment with more families living with fewer funds, resulting with many people who do not have minimum food or shelter. It is unclear if China has such a problem.
Well, let's look at the economic stats, according to the CIA World Factbook:
- Unemployment is at 4.3%. Not bad, and certainly less than what we have.
- GDP per capita (PPP) is $7,600. That is hardly the rich power we think of when we think "China". It's middle-income, with vast disparities in their society. While some live in fabulous apartments in Shanghai or Beijing, others live in third-world poverty in Urumqi or Lanzhou.
I think it's clear that China has a problem with poverty generally. The US has a temporary unemployment problem; China has a structural wealth problem.
What's this? Another weblog? On transit?
I usually find myself on the other side of the debate on slashdot when "yellow-peril" fear/hate mongering gets out of hand. However, in this case, I feel the need to balance the other end of the wheel. All those things you cite *are* indeed unique experiences in Chinese history. But I think it would be insincere to conclude that Africa is lacking in the same type of experiences in the span of it's more recent history.
Remember that a great deal of the Cold War fought by proxy between east and west went down in many parts of post-colonial Africa. Many of these local conflicts were heavily sustained by the same ideology that produced the Great Leap Forward, etc. Command-style leadership is nothing new to most regions of Africa.
On the other hand, a large number of the more stable nation-states in Africa eventually wised up to the need for independence from both sides of the Cold War. As marginally effective as it actually turned out to be, the Non-Aligned movement emerged as an attempt to balance all aspects of the different operating philosophies between east and west, forging a path that does not capitulate either side. It is reasonable to draw a parallel between this and the blending of socialism/capitalism exemplified by "Socialism with Chinese characteristics". With that said, Africa is almost unanimously represented in the organization. For one example of how eastern and western resources have been integrated, many African military have equipment and weapon systems from both east and west working side by side. A cynic may point to the fungibility of cold hard cash when exchanged for good from either side. However, I think one needs to appreciate the subtleties of good business and acknowledge that Africa already knows how to play in the camps of different parties that have different rules.
Economic reform is perhaps the best/strongest argument you have made here. But I would like to point out that in this area, China isn't *that* much further ahead than the rest of the pack is many critical areas. Corruption and lack of industrial regulatory oversight is still something that China has a *lot* of room for improvement. At present, the difference in the size of the economy is the most important factor here.
The way I see it, the major difference and the fundamental root of the issue is that compared to China, Africa is so much more culturally/ethnically fractured. On this point, I sometimes surprise many of my liberal friends when I tell them I cut Bush a lot of slack for calling Africa a nation. In order to emerge as a world power, it truly needs to become and function like a unified nation in the same way China did post-colonialism. Unified by the shared history and culture of the Han ethnic group, the Chinese people did finally emerge as a nation of consequence after the collapse of the Ching imperial dynasty. But this was a painful and costly process that occurred over two world wars and a drawn out civil war that cost millions of lives. And despite the unifying effect of a common identity, I don't think many foreigners actually appreciate the linguistic distance between speakers of different dialects. Without the benefit of the common tongue Mandarin, I might as well be a medieval Spaniard outside my birthplace of Nan Chang.
So there you have it: I think the one critical thing that Africa doesn't have going for it is a more compelling sense of "Pan-Africanism". Unless all the people of the continent are willing to back a common course for the future, none of the existing infrastructure achievements such as numerous hydro-electric dams, irrigation projects, etc. can be utilized to the fullest extent of their capacity.
Stay sentient. Don't drink bad milk.
This seems to be a popular argument on Slashdot lately. Taxation is theft, and yet prosperity is only possible because the government allows individuals to accumulate wealth. In other words you want the government to protect your liberties and your property, you just don't want to pay them for it.
Think about the biggest advancements of the 20th century. Most of them were government lead. The national electric grid, improved transport links, military hardware advances, space exploration etc. When it comes to big, expensive and/or risky projects the government does what private enterprise cannot.
It is interesting that you should paint centrally planned economies as being run by Luddites. China is doing the exact opposite, pushing ahead with high tech projects and automation. China is not dumb, just look at how it manages America through Chinese banks lending them money.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Prior to the opening of the Federal Reserve, the US fluctuated between 2 and 5%. Today, it's greater than 40%. That is as bad as many African nations.
FYI, that's a false statement, most African nations spend much less than 40% of their GDP on providing civilization to their citizens: Burkina Faso (21.6%), Cameroon (18.5%), Côte d'Ivoire (19.7%) - you name it.
The countries you wanted to compare the US with is Germany (43.7%), Finland (49.5%) or Sweden (52.5%).
What does that spending buy their citizens: universal health-care for all citizens, as a birthright. High quality public education that almost all eduction happens in public schools and universities. Well-developed public transportation systems shipping children to school which transportation system I'm sure you'd enjoy as a tourist as well. Pervasive unemployment insurance and various protections for job-takers and their families: no hire-and-fire. Compare German unemployment during the crisis with US unemployment and guess which one spends more of its GDP on common good services for its citizens?
And you want the US to move to the same level of civilization as Burkina Faso or Côte d'Ivoire? Corporate donors will love it but good luck selling that to your fellow citizens ...
Actually, many in the US are homeless not because of mental health issues, but because of the justice system, and then leads to mental health issues.
Go to jail, do not ever find a real job again unless you are staggeringly unlucky. What else have you got other than going back to jail or living on the street?
I used to work with an organization that trained homeless in useful work skills and tried to find them jobs and get them on their feet. Overwhelmingly these were men, overwhelmingly they had followed a trajectory similar to "had a good job, went to jail (almost always for drug offenses, and almost always for ridiculously small quantities), got out and nobody would hire them because of their record"
Not to say that your larger point is not dead on - we have SOME poor people in this country, but the vast majority considered poor by our standards are quite well off compared to real poverty.
Since I can't tell them apart, I treat all ACs as the same person.