Posted on 01/13/2013 5:53:02 PM PST by navysealdad
Heee Heeeee exactly right!
Another reason to bring work back to the US or other western countries: intellectual property. You build your factory, give them the designs, the parts lists, the assembly instructions. After starting production and building up the supply chain, a manager of your factory goes down the street, uses your designs and assembly instructions and starts building YOUR product. For less than you. And then starts selling it for a little less money and a lot more profit.
Even in “The World is Flat”, the author states that non-compete agreements didn’t seem to translate into Chinese.
Then keep their slave-labor garbage out of our country.
Most of the Asian Tigers (Korea, Taiwan, Singapore, Malaysia & Thailand) had limited individual freedoms during their fast-growth years. And the state remains a major player in those countries. China's advantages relative to countries with similar or lower wages are (1) its relatively business-friendly policies, (2) its relatively low level of corruption, (3) a highly-motivated and intelligent work force and (4) relatively good infrastructure, including roads, rail, power, water supplies and communications. Based on nominal GDP per capita numbers, the average Chinese wage is 5x the average Indian wage. Its GDP per capita rank is in the upper half of the 200-odd nations on the list, up from nearly rock bottom 30+ years ago. The ruling party's wholesale adoption of the Singapore model of development appears to have paid off in spades. Singapore's former prime minister (and still probably the eminence grise in Singapore), Lee Kuan Yew, recalls his meeting with Deng Xiaoping in 1978:
ONE founded a tiny nation of two million, and succeeded in turning it into an economic powerhouse.
The other reformed a once-great empire of more than 900 million, and was trying to grow its economy after years of poverty and isolation.
One had grown up in an Anglicised family, spoke English better than he did Mandarin, and fought the Communists.
The other spoke only Mandarin, with a Sichuanese accent, and was a Communist leader.
Yet both men saw what was needed to create order out of chaos, and were not afraid to make radical changes to achieve what they wanted for their countries.
For this, they shared a mutual respect and admiration that cemented a ‘special relationship’ between Singapore’s founding father Lee Kuan Yew and China’s reformer Deng Xiaoping, according to a new biography of the Chinese leader.
By the end of Mr Deng’s first official visit to Singapore in 1978, says its author Ezra F. Vogel, the two men had developed a bond that, ‘like that between Zhou Enlai and Kissinger, enabled them to communicate with mutual respect on a common wavelength’.
Modern China’s first premier Zhou and then US Security Adviser Henry Kissinger were instrumental in taking the United States and China towards resuming diplomatic relations in the 1970s.
Likewise, Mr Lee and Mr Deng’s relationship paved the way for diplomatic and economic ties between Singapore and China.
In his newly published book, Deng Xiaoping And The Transformation of China, the eminent Harvard University academic Vogel reveals for the first time the depth of Mr Deng’s admiration for Mr Lee, and describes both men as having much in common.
They had come of age fighting colonialism, were both ‘straightforward realists, utterly dedicated to their nations’, and believed in the need for strong leadership.
‘Deng had close ties with many foreign leaders, but his relationship with Lee reflected a greater depth of mutual understanding,’ writes Professor Vogel. Only one other person, Hong Kong tycoon Yue-Kong Pao, he says, had bonded with Mr Deng the way Mr Lee did.
‘From Deng’s perspective, what made Lee and Y.K. Pao attractive was their extraordinary success in dealing with practical issues, their first-hand contacts with world leaders, their knowledge of world affairs, their grasp of long-term trends, and their readiness to face facts and speak the truth as they saw it.’
According to Prof Vogel, Mr Deng admired the Singapore leader’s accomplishments in the young Republic, while Mr Lee was equally impressed by how the Chinese leader was dealing with problems in the Communist giant as it tried to enter a modern world.
Prof Vogel, who has written a number of influential books on the rise of Japan and Asia, is best known for his 1979 book Japan As Number One: Lessons For America. Aware of Mr Lee’s familiarity with Mr Deng, he flew to Singapore to interview the former prime minister when researching his latest book.
Then Vice-Premier Deng and Mr Lee first met in 1978, when Beijing was seeking support from South-east Asian nations amid strengthening ties between Vietnam and the then Soviet Union. By this time, the two Communist giants had fallen out, and China was afraid that Malaysia, Thailand and Singapore would swing over to the powerful Soviets.
Prof Vogel says that when Mr Deng visited Singapore on Nov 12, 1978, both men were already ‘aware of the other’s reputation’, and made special efforts to bridge the cultural gap.
Mr Lee prepared a spittoon for Mr Deng and offered him an ashtray, knowing the Chinese leader’s habits. But Mr Deng, having found out Mr Lee’s views on smoking, made sure not to spit or smoke during their meeting.
When Mr Deng laid out his fears about the Soviet Union, he was surprised by Mr Lee’s frank reply that Asean nations were more worried about the ‘China dragon’ than the ‘Russian bear’, as Mr Lee recounts in his own memoirs.
But Mr Deng recovered quickly, and asked what was wanted of China – a question that ‘astonished’ Mr Lee, who recalled the meeting in his two-part memoirs, The Singapore Story.
‘I had never met a communist leader who was prepared to depart from his brief when confronted with reality,’ he wrote, ‘much less ask what I wanted him to do.’
Mr Lee too paid tribute to the Chinese reformer: ‘He was the most impressive leader I had met. He was a five-footer, but a giant among men. At 74, when he was faced with an unpleasant truth, he was prepared to change his mind.’
Indeed, their meetings – Mr Deng and Mr Lee met again in 1980, 1985 and 1988 – ultimately led to significant changes in the relationship between China and Singapore.
Up till then, Beijing and its propaganda had refused to recognise Singapore’s independence, and condemned Mr Lee as a ‘running dog’ of the West.
But, writes Prof Vogel: ‘A few weeks after Deng visited Singapore, this description of Singapore disappeared… Instead, Singapore was described as a place worth studying for its initiatives in environmental preservation, public housing, and tourism.’
Who needs The Arsenal of Democracy when it conflicts with Free Trade Zealotry?
Yours was a good post.
If I recall correctly, the Vietnamese minimum wage back then was $50 a month, so they're not getting the dregs for $100 a month. That's the beauty of operating in cheap labor countries - you can get several college grads for price of 1 stateside high school dropout. The problem is that those foreign college grads tend to go into business for themselves, whereas the high school dropout will probably never compete with you.
Tariffs and industry-wide unions = Brazil. The reason the country prospered in the mid-40's through the 70's was because the world's big industrial nations had had their plants burned to the ground and spent decades rebuilding. Once they got out of their funk, the writing was on the wall for many unionized industries stateside - featherbedding work rules and pie-in-the-sky wages contributed to the inexorable of so many industry stalwarts. While I don't have an issue with tariffs per se, the continued existence of industry-wide unions like the UAW along with tariffs would cripple our international competitiveness.
According to Forbes, it's a fraction the size of Cat (at $5.2b in revs vs Cat's $60b), but the margins are way better than Cat's, at 17% vs Cat's 8%.
Automation + energy savings means that most manufacturing will probably return back to a local model. Then there are companies like Amazon building local distribution centers for timely shipping who also may see an upside in local suppliers.
Bottom line, agriculture is now done by 1 to 3 percent of the work force thanks to automation. Manufacturing is now going through the same shrinkage. At some point everything the world needs produced will be done by lights out automated manufacturing centers and probably employ about 1 to 3 percent of the work force. China and India will not be able to compete against this and will follow suit in their own countries.
Imitation is the sincerest form of flattery. :)
That's been the pattern when US companies outsource to "cheap" foreign countries: as soon as the people in the foreign operation learn all your trade secrets, intellectual property, and general know-how, they quit and start up their own operation, selling the same product for less to WalMart or some such.
But it does improve the CEO's numbers for the first few years.
The problem is that nobody is immune to this kind of thing, whether or not he sets up a plant in China. Any given Third World company can hire your ex-employees to set up a plant for them. There are developed country consultants who specialize in this kind of thing. A fair number of retired Japanese workers from the major keiretsus are making a good living doing consulting work for Chinese companies. After all, it's not exactly a big deal to run ads in Japanese newspapers or set up an account with Japanese headhunters for former big company talent.
The kicker is that few companies make their own production equipment, so a lot of the machinery a Third World company needs to make anything it wants can be bought. Capital equipment accounts for most of the developed world's exports to Third World countries. In many cases, they're not just buying the equipment to make stuff for the local market.
The only way for companies that make run-of-the-mill stuff to survive is to move to a cheap labor locale, whether it's China or elsewhere. Because its domestic and foreign competitors certainly will, and in that arena, product pricing extremely competitive.
If you have a product that's patented or is manufactured using trade secrets essential to its manufacture, domestic production is the way to go. The question is - how many companies are in such a position?
Wages would have to shrink considerably for that to happen. Port to port shipping costs peanuts, thanks to the invention of the shipping container. Last I heard, it was about $0.10 per pound per refrigerated container. It actually costs less money to ship something from a major Chinese port to any given US port than to ship it from the West Coast to the East Coast. US wages are now about 10x Chinese wages, and about 40x Indian wages. That's such a big gap that it's not really surmountable by total automation. Another problem is that machine tools are expensive and special purpose. When circumstances change, humans can be retrained, whereas machine tools might be sold for little more than scrap value.
Ultimately, as the Third World gets more productive, their wages will rise, and the gap will narrow. But until it gets to the point that Western wages are no more than 3x foreign wages, manufacturers of run-of-the-mill stuff will continuing moving there in order to remain price-competitive.
Automation will take over. I saw a piece on robotic workforces. They had a robot that could do intricate manual tasks and it cost 3.40 an hour to operate (including purchasing cost) it would last at least 3 years maybe longer AND the machine that would replace it will be more efficient and most likely cost less or nearly the same.
It don't take breaks it won't join a union it won't need health insurance and it doesn't call in sick, it doesn't get overtime and it will work all holidays and even when the weather is bad. It just needs occasional maintenance.
They had another piece showing a warehouse. Each Robot there could do the work of one and a half people 24/7 (only down for recharging time) They were even cheaper.
Manufacturing jobs are not coming back in big numbers. Robotics will replace most humans in these jobs.
Sorry. I phrased that badly. I was trying to say that Sany took up the largest exhibition space there, not that they were the largest company. It was a huge change from the 2008 ConExpo. FWIW, they are supposed to be the 6th largest heavy equipment manufacturer in the world.
Thanks for the clarification. I did understand your initial point, though. I found it interesting that they appear to be making a play for the North American market.
Guy I know bought a Chinese-made lathe and was pretty impressed at what he got for the price. I know next to nothing about heavy machinery. What was your impression of Sany's stuff - was it throwaway junk or was it somewhat usable?
I'm not a heavy equipment operator, so my opinion isn't really worth anything regarding their quality. But you are right, they definitely appear to be trying to make a big impression in North America.
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