What to Do About China?

Concerned about your business prospects in the domestic market? Well, Providence Journal business-section columnist John Kostrzewa has a suggestion:

With the local and national economies weakening, and perhaps already in recession, small and large businesses are worried about where the growth will come from in 2008.
How about looking overseas, especially to China?

He offers advice, gleaned from a seminar on the topic sponsored by Citizens Bank, the Bank of China and the Greater Providence Chamber of Commerce. “Don’t underestimate the language barrier,” says one speaker. However, to complement the growing Chinese urban consumer market:

Business owners… can find lower labor, operating and land costs, a surging demand for foreign products and less competition in other parts of the country.

Ah yes. Lower labor costs:

Officially, 2,375 trafficking cases were reported in China last year, a 7.6 percent decrease from 2006, according to the Public Security Ministry.
But the statistics are based on China’s narrow definition of trafficking, which covers only the kidnapping, purchase or sale of women and children younger than 14, not older teen-agers and men. Activists say the number is grossly understated and that tens of thousands of people are trafficked each year.
Historically, many victims have been women forced to marry lonely farmers, or male babies illegally adopted by couples who wanted a son. But those types of cases are leveling off, while cases of migrants deceived into sexual exploitation and forced labor are increasing, activists say.

I know, I know. I’ve got those libertarian, free-market leanings, as well. But I don’t think we, as a nation, have come up with an adequate solution for dealing with the potential to globalize our economy without globalizing our principles — in part because we’re so divided on what our principles should be. Without some truly visionary innovation on our shores, I’m not confident that either our economy or our moral center will remain strong enough for those invisible hands to crush international iniquity.
Jay Nordlinger puts it inimicably:

Reading a report about China’s latest massacre in Tibet, I was struck by one line in particular: “China is gambling that its crackdown will not bring an international outcry over human rights violations that could lead to boycotts of the Olympics.”
That is a very, very good gamble. Nobody gives a rat’s behind what the Chinese do, to Tibetans or anybody else. It is a curious fact of modern times. If only China’s rulers would embrace the Bush administration: Maybe the world would care!

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George
George
13 years ago

It’s not just about the cheap labor. For many companies, not just American, China represents a huge, untapped market. Think about a company that makes motor protectors for motors that go in washer machines and dryers. As China emerges from the dark ages, the prospect of every family in China eventually having a washer and dryer in the home like most Americans do is an enormous opportunity for the companies that make the machines and the components. But what smart companies must also do in order to compete iw reduce transportation costs and lead times by locating manufacturing closer to the customer. This exports most of the supply chain along with the product. The Emerson’s who build the motors open a plant in China to be closer to the Whirlpools who make the machines. The Elmwoods or Sensatas open plants to better serve the Emersons. These companies develop local suppliers of the wigets that go into the parts they make so they can meet the quality requirements and so they don’t have to deal with a 10,000 mile trip, customs, duties, etc that go along with it. Yes, there’s obvious labor savings, but labor ends up being about the smallest reason that companies move their operations overseas. In a high volume operation that uses automated machinery, the difference between a $2/hr machine attendant verses an $18/hr attendant shows up in the third decimal place in some instances. Aside from the logistics costs, where American companies save significantly by operating overseas is in the cost of business regulation, insurance and utilities. The V.P. of operations of my former employer met frequently with the Governors and legislatures of Massachusetts over a period of many years while the company employed over 6,000 locally and close to 10,000 nation wide. He told them it… Read more »

Roland
Roland
13 years ago

You make a great point Justin in your concern about coming up with “…an adequate solution for dealing with the potential to globalize our economy without globalizing our principles.” This may be a classic “which comes first” debate. On a smaller scale, has the cause for freedom in Cuba been advanced because we haven’t bought their products, or did that simply retard wealth creation enabling the few in power to retain that power longer? Global markets are only a threat to the US if we fail to respond to competitive pressure. Capital flows to regions where more profit can be made and kept. The US is a far more stable environment to do business, and we pay a hefty price for that in the form of corporate taxation. But internationally, OECD partners are discounting their own “prices”. How about this reform synopsis: * a less complicated tax system; * a broader tax base; * a lower tax rate; and * a stronger tax administration. Ironically, this is a summary of tax reform enacted in China this year: http://www.industryweek.com/ReadArticle.aspx?ArticleID=14523 They dropped corporate income tax rates to 25% (compared to our rate of 35% federal plus > 8% in RI). While the rest of the world tries to out-do each other in creating more favorable business tax climates, we wring our hands dreaming up new “revenue streams”. The low cost labor reasons for moving overseas will diminish in value as economic freedom takes hold. Some argue that the value of the dollar is not declining, but rather that international currencies are strengthening on the heels of tax rate reductions enacted in the last two decades. In fact, a large customer of mine is in the middle of a $100 million reverse line transfer bringing back a major device program back to the… Read more »

Mike
Mike
13 years ago

If China were run by Christians instead of gun-grabbing, baby killing atheist “progreesives” like Pat Crowley, there would be a total embargo on it like south Africa which had more freedom than the Chinese progressive slaves can even think of having.

Monique
Editor
13 years ago

“Nobody gives a rat’s behind what the Chinese do, to Tibetans or anybody else. It is a curious fact of modern times. If only China’s rulers would embrace the Bush administration: Maybe the world would care!”
I like that last line. It’s not at all clear that the first line is correct, though.
From the AP this evening:
“The International Olympic Committee has been forced to lobby against boycott calls and the possibility of the games turning into a political demonstration.”
http://ap.google.com/article/ALeqM5jB0H7ECjcR4091djlQuoNtCQ4rAwD8VG4S301

Ken
Ken
13 years ago

Monique, “Nobody gives a rat’s behind what the Chinese do, to Tibetans or anybody else. It is a curious fact of modern times. If only China’s rulers would embrace the Bush administration: Maybe the world would care! I like that last line. It’s not at all clear that the first line is correct, though. From the AP this evening: The International Olympic Committee has been forced to lobby against boycott calls and the possibility of the games turning into a political demonstration” Somebody better give a rat’s behind what the Chinese do! The United States is banking that the China will invest in the US to help defray the looming recession or depression. Chinese are now buying US interests keeping the stock market afloat. Try to spending 24 hours without purchasing a product made or partially made in China. “Posted on: Tuesday, March 18, 2008 Failure of Bear Stearns signals deeper problems By John Waggoner and David J. Lynch USA Today If the U.S. economy were a car, all of its warning lights would be flashing red. The breathtaking collapse of investment bank Bear Stearns over the weekend is the latest — and perhaps the most alarming — indicator to flash on the economy’s dashboard. First, the crisis in subprime mortgages — loans to those with poor credit — infected the credit markets. Then home prices started sinking. Then mortgage defaults rose, and the economy began to sputter. Now, the Federal Reserve is desperately trying to stabilize the credit market before a failure of confidence can poison the entire U.S. financial system. The latest sign that the financial system is close to overheating: Bear Stearns, once the country’s fifth-largest investment bank, agreed Sunday to be sold for just $2 a share, down 93 percent from its closing price Friday. The… Read more »

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