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This is the Chinese Century

August 30, 2011 By: Rollie Category: Everyone's entitled to my own opinion" by Roland Eyears

This is the Chinese Century
A half-century ago in the aftermath of WWII, European industry stood in partial ruins, while
much of the world remained comparatively primitive. American military power was at its
zenith, and we were the manufacturing center of the universe.
By the sixties, “Japan Incorporated” was flooding the U.S. with manufactured goods at
great prices by “dumping.” Japanese consumers paid on average 40 percent above world
prices to subsidize the penetration of our markets. Thanks to U.S. taxpayers, Japan had
no defense costs.
China presents an entirely different paradigm.
Mao Zedong’s Great Leap Forward failed miserably in the late fifties. Tens of millions
starved as the Communists controlled all means of production. However, what they
eventually created was a society positioned for capitalism, with hundreds of millions of
compliant workers.
In a Chinese factory, one might see a supervisor-to-employee ratio as high as 1 to 350, far
above western standards. This reflects efficiency, self-discipline, low cost, and the
realization that for every worker who lacks motivation there are hundreds eager to
demonstrate theirs.
For 150 years the developed nations have substituted machinery for labor. Today’s China
is the factory floor of the world. Yet that floor is generally devoid of multi-million dollar
capital investment in the form of automated lines and robotics. Armies of trained hands
produce precision products with no sacrifice in quality. China, with nearly 1½ billion
people, does not have the world’s cheapest labor force. What it has is a huge, reliable, low
cost, skilled labor pool within a stable political environment.
Researcher Ted C. Fishman cites Shanghai’s Wanfeng whose business 10 years ago
consisted of workers literally hammering out motorcycle wheels in a garage. Today
Wanfeng ships alloy wheels worldwide. This year its rubber mallet and cordless drill
equipped workers will hand build thousands of Jeep Grand Cherokee look-a-likes that sell
for $8,000 to $10,000.
Another critical factor is the largest migration in history. By 2010, almost half of China’s
population will have moved to cities. A peasant who gives up the farm for the factory can
triple his income to an average $1,000 a year. But that hardly tells the story in a country
where the minimum wage is 30 cents an hour and not everybody gets that. In many
industrial centers, members of China’s growing 100-million person middle class
(practically non-existent 10 years ago) often work more than one job. Factor in 5 times the
buying power of an American and that may translate to $25,000 for a married couple.
Virtually every industry has excess capacity. In 1978, China produced 400 washing
machines and 200 room air-conditioners. Two years ago, those figures were 16 million
and 23.3 million. According to the National Bureau of Statistics, urban incomes jumped
2,250 percent during that period.
China’s economy is growing at uncomfortable rates – 9.8 and 9.6 percent in the first and
second quarters of this year, up over a point from 2003. Faced with energy shortages,
serious water and air pollution in manufacturing centers, and having become a net
importer of food, the government is limiting growth in overheated sectors.
There used to be the retail price and the wholesale price. Now there’s also the China price
– the one to match if you want the business.
Wal-Mart alone accounts for 1 percent of China’s GDP and 12 percent of its exports.
It’s good that Wal-Mart prices are so low, because the American who now earns $9 an
hour, marked down from $28, can’t pay the old retail. It’s a circle, and not everyone’s
happy.
In a quarter century the Chinese have quadrupled GDP to become the world’s 6th largest
economy and the most active trading nation behind the U.S. and Germany. Their lack of
political baggage is enabling a major commercial presence in Africa as they keep their eye
on the ball and not on human rights injustices.
Nor is it all about manufacturing. For instance, the northeastern seacoast city of Dalian
boasts 22 universities with over 200,000 students. Most will receive science or
engineering degrees. Due partly to proximity, Japanese are swallowing old hatreds and
hiring Dalian software engineers at a third the cost. Further, American firms are
establishing R & D centers there, as U.S. schools turn out fewer engineers every year.
The military implications of all this are immense and a subject for another day.
Centuries ago China was called Zhongguo, the “middle kingdom,” because its people
thought they were at the center of civilization. If they weren’t then, they soon will be.
Roland C. Eyears
Copyright 2004

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