Tuesday, November 14, 2006

China, Inc

Just finishing up this book. Real interesting. The gist of it revolves around two things. One is that they have so many poor people that are willing to work for next to nothing that they can make anything they decide to make for much less than anyone in the world can. The other is that they represent such a huge market for other countries products (they have 1.5 billion people) that no country can afford to tick them off and countries make crazy concessions to them (like giving them patent rights to products that the companies are producing in China) to get access to this market. It's pretty fascinating for a communist country. They basically have a very entrepreunerial market economy that developed in spite of all the communist government influence. Part of the reason their economy is so vibrant is that entrepreneurs learned to be creative as they skirted all the government rules against capitalism to turn it into a market economy. Then the government woke up and saw it was a great thing for their country and embraced it. It doesn't seem there is a lot of state run industry left, it's mostly privately owned and operated.

A couple other random insights:

Their economy grows at a rate of 7-9% per year. It's a great year when ours grows at 4%.

If their standard of living doubled (which would still leave it lower than Botswana's standard of living) the size of their economy would equal that of the United States.

Stuff that was marked 'Made in China' used to be all crap. Not so anymore. Most of it is apparently high quality stuff and China is the reason we can by DVD players for $30 and we can buy quality electronics at Wal-Mart cheaper than anywhere else. Wal-Mart does lots of business in China.

They have basically no pollution regulations and their killing their environment.

They have one labor union, it's state run, and it doesn't seem like it does anything because the farmers are literally dirt poor and all migrating to the cities so they can be just a little less poor working in a factory for next to nothing.

Because the farmers are moving to the city, and the ones who are left don't have the knowledge/technology that we do, and because they are developing a lot of their farmland into industrial centers, and because they have 1.5 billion people who need to eat... they're always going to need to get food from elsewhere, and that is mainly us.

Their middle class is 100 million people. It didn't say what the lower class was but I would assume the upper class is much, much smaller than the middle class, leaving about 1.4 billion people in the lower class. Seems like that would be a problem to me.

They have a $500 billion reserve of US dollars to spend on whatever companies, oil supplies, real estate, etc. that they decide they want.

Their military is not very advanced, but that will probably change, in part because of that $500 billion reserve. The author did not forsee some big showdown between the US and China though, because our economies are increasingly interdependent.

They graduate 235,000 new engineers every year. We graduate 45,000. We're 5x smaller as a country, so that's an equal proportion, but still a concerning thought.

Curious, is anybody worried about their job going to China?