In 1990?s, foreign firms based in America, Europe, Japan and the rest of East Asia moved their manufacturing operations to China. But the controls and the profits of these operations remained with the foreign firms. While China gets the jobs, it does not get the wage benefits and profits of globalisation.
Around the middle of 19th century, Napoleon had made an important prediction about China: He had said: ?A demon is sleeping in China. He will shake the world when he wakes-up.?
China is really shaking the world. It has become the final assembly station for the vast global production networks.
At Shenzen in China, hundreds of workers at a Japanese owned Hitachi factory are fashioning plats of glass and aluminium into computer disks to be exported to America with the label ?Made in China?. These days ?Made in China? is mostly made elsewhere by multinationals companies in Japan, South Korea, Taiwan and USA. This evolving global supply chain, which usually tags goods at their final assembly step, is increasingly distorting global trade figures and has the effect of turning China into a much bigger trade threat then it may actually be.
Gainers and Losers
It may appear that China is getting the big pay-off from trade. But no. Some of the biggest winners are the consumers in America and other advanced countries, who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China.
American multinational corporations and other foreign companies, including retailers, are the largest invisible hands behind the factories pumping out these inexpensive goods. And they are realising the bulk of profits from the trade.
In 1990?s, foreign firms based in America, Europe, Japan and the rest of East Asia moved their manufacturing operations to China. But the controls and the profits of these operations remained with the foreign firms. While China gets the jobs, it does not get the wage benefits and profits of globalisation.
The real losers are most low-wage workers elsewhere, like the one at Hitachi who last their jobs in Japan, along with workers in other parts of Asia. Blue collar workers in America have also lost out.
Asian exports to America have actually fallen over the last 15 years. Factories in Taiwan used to assemble many of world computers; now China does it. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do it. And Japanese plants ones manufactured the most popular electronics brands like Sony, Panasonic and Toshiba; now many of these brands are shipped from Chinese ports. About 60 per cent of China'sexports are controlled by foreign companies. In categories like computers parts foreign companies command even greater share of control over exports.
The biggest beneficiary is America. A Barbie Doll cost 20 dollars in USA but China gets only 35 cents!! Because so many hands in different places touch a particular product, one may as well throw away the trade figures.
In a globalised world, bilateral trade figures are irrelevant and the trade balance between America and China is irrelevant.
China'ssupply of cheap labour coupled with deliberately undervalued currency helped some $ 465 billion in foreign direct investment from 1995 to 2004.
Everyone has moved to China. China'strade with USA since 1990 has risen some 1,200 per cent!!
In China, thousands of factories have created millions of jobs where a worker earns about 75 cents an hour-about 1/6 of the wage in USA.
China'srise as a world commercial power is in striking contrast to that of Japan in the 1980?s, when the Japanese were building up their own brands like Toyota, Honda and Sony. China has few global brands beyond Lenovo and Hairer, which are also struggling for existence.
Chinese officials admit that the trade statistics showing huge surpluses are misleading indicators of China'sprosperity. China only gets pretty figures, Americans get the real profit.
Dhol ki pol of China'sexport trade.
