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Signs of change in China labor situation


John Ranalletta

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John Ranalletta

Foxconn, maker of most of Apple's products has had to raise pay rates substantially. Honda plants are closed over pay disputes.

 

I was in Shanghai in March, just after new year's holiday and heard about labor shortages as workers failed to return to the cities from the holidays.

 

While Shanghai isn't representative of the whole of China, it's easy to see its prosperity can't exist on slave-labor wages.

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Francois_Dumas

Yup, makes sense. India is already much more expensive than it used to be too..... in the end history will repeat itself, assuming there is enough time left.

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John Ranalletta

The beneficiaries in now and in the next decade are Vietnam and Eurasia. Clients are doing green field startups in former USSR countries with great success.

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John, while you were there, was there any discussions of the actual rate of pay.

 

When I visited inland China in April, the managers were talking to us about pay increases, but the rate had gone from $0.50 / hr to $1.00 / hr. At $1.00, the cost per unit of our goods is still extremely low.

 

Apparently, it's the younger workers that are not returning. The middle aged workers are still looking for job stability, and are willing to take less pay for steady work.

 

Was this your experience as well?

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Hmmm. Interesting. Speaking from a perspective of total ignorance, it's long struck me that, from a company's perspective, too much reliance on manufacturing within China was a proposition fraught with peril. On one hand, labor is cheap and the Chinese work force seems as capable as any of producing quality goods. On the other hand, China has an odd mixture of totalitarianism and entrepreneurship that seems to be potentially volatile.

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Lost of Chinesse factory workers in the next decade might find out what it's like to be an unskilled american worker... laid off when you factory is closed and moved to somewhere that has even cheaper labor costs. What goes aroudn comes around eventually.

 

Of course China will be working hard ot quickly shift form mostly unskilled labor to a larger mix of skilled labor. But that took the US 3 decades and we have still struggled to change. They may have to accoomlish it in 5-10 years.

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John Ranalletta
Lost of Chinesse factory workers in the next decade might find out what it's like to be an unskilled american worker... laid off when you factory is closed and moved to somewhere that has even cheaper labor costs.
Hopefully, that won't happen. Due to China's population policies, there is an inordinately large group of unmarried males in their prime who, if out of work, could cause huge political problems. One political alternative is export this group as a uniformed army that could overwhelm any and all of its neighbors if it chose.
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Lost of Chinesse factory workers in the next decade might find out what it's like to be an unskilled american worker... laid off when you factory is closed and moved to somewhere that has even cheaper labor costs.
Hopefully, that won't happen. Due to China's population policies, there is an inordinately large group of unmarried males in their prime who, if out of work, could cause huge political problems. One political alternative is export this group as a uniformed army that could overwhelm any and all of its neighbors if it chose.

 

That is a frightening thought. 1 - Because of the numbers and 2 - Because it doesn't sound outlandish.

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SAAB93driver
Hopefully, that won't happen. Due to China's population policies, there is an inordinately large group of unmarried males in their prime who, if out of work, could cause huge political problems. One political alternative is export this group as a uniformed army that could overwhelm any and all of its neighbors if it chose.

 

If they start talking about invading Taiwan again then I think it it time worry because that would be a direct confrontation to the US and our policy there.

 

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John Ranalletta
Thus the reason that they won't be appreciating their currency anytime soon. That's my take on it.
The US junkie is blaming the pusher. This has no good end.
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Good article.

 

Over the last business cycle, many more US companies have developed a vested interest in partner manufacturing in China. Thus, they will naturally be hesitant to file dumping claims this time around.

 

Additionally, other Pacific rim currencies are waiting, champing at the bit, for China to appreciate the RMB, so they have a excuse to do the same. The MYR is number one on that list (the way I see it).

 

All a duty will do at this point, is piss China off.

 

Slow, steady growth should be the goal.

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If they start talking about invading Taiwan again then I think it it time worry because that would be a direct confrontation to the US and our policy there.

 

Taiwan is small potatoes in the grand scheme.

 

If China wants to invade, they'll go after natural resources that they need.

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SAAB93driver

 

If they start talking about invading Taiwan again then I think it it time worry because that would be a direct confrontation to the US and our policy there.

 

Taiwan is small potatoes in the grand scheme.

 

If China wants to invade, they'll go after natural resources that they need.

 

Maybe small potatoes but very symbolic as a democracy. The US policy is to protect Taiwan's democracy against invasion and China sees Taiwan as part of China. An invasion would be a test to see if US government means what it says.

 

 

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The "skilled" Chinese worker is not that skilled on average.

 

The vast majority are not really that skilled, and independent or critical thinking is a rare thing.

 

There is is business "ethics" in China, which is about as good as their traffic laws. They are very much only for themselves, and screw anyone else.

 

There are the exceptions, they have too few of them to matter.

 

Their wages will remain low until this problem is resolved.

 

Now I have to get back to addressing Chinese quality problems.

 

Rod

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John Ranalletta

"independent or critical thinking is a rare thing"

 

It isn't valued, just as it isn't valued in the Toyota Production System. That doesn't mean the Chinese people as a whole have fewer inventive, risk-oriented people. In fact, the internal challenge they face is when those proactive people demand the independence that comes from private wealth. IMO, the government holds sway because it's convinced the populace that the good of the state is more important than the good of the individual.

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What will Cina do will all it's left over lead based paint???

 

Will US companies get more tax breaks for relocating to Taiwan?

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The "skilled" Chinese worker is not that skilled on average.

 

The vast majority are not really that skilled, and independent or critical thinking is a rare thing.

 

I think despite the wealth, education and freedom of the upper 10% of Americans, I don't think the remaining 90% stacks up much bette ragainst the better educated Chinesse workers if you exclude those involved in rural agriculture that have very little eduction.

 

While culturally/socially they are stripped of their individualism ot a certain extent, it's a bit arrogant to beleive that they are intellectually inferior, when they may be the opposite.

 

But I will admit, intellectual ability vs. criticqal thinking and real world problem solving is a differnt thing.

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That chart is basically useless because it doesn’t (appear to) take into account the actual purchasing power of the various currencies. Which is all that really counts to the various local populaces. Ie, "How much will my pay/currency buy?"

 

Is it even adjusted for exchange rates?

 

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John Ranalletta

I'd guess the chart would have been impossible to construct at all w/o using exchange rates.

 

My take away is that labor rates on the NA continent have to fall dramatically to competitive levels as China and India labor rates are not likely to advance as dramatically.

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