posted January 16, 2004 05:32 AM               

Unions are also mandated in China as well for those who think otherwise.

posted January 16, 2004 08:43 AM               

I'm astounded by how low the wages really are. Do you have a feel for the cost of goods in China, like housing, food, cars, gas, and so on. I would believe that gasoline should be at least as costly as in the US. How could anyone possibly own and drive a car on such a low wage?

posted January 16, 2004 02:39 PM               

Tom C

posted January 16, 2004 05:28 PM               

quote:

---

Originally posted by Tom C:
It is my belief that over time, because of the natural tendancy of people, that things will level out. Then, if you make only $50 per month, you can't live at all. As I have stated before the whole China bubble now is an artificial situation caused by represive politics and greed, not good business practices. As Japan was once the low cost labor provider, it is now not. Mexico, China and so on will eventually be on the same playing flield as the rest of the world.

---

posted January 21, 2004 09:01 AM               

Any thoughts from this crowd?

posted January 22, 2004 06:28 AM               

What your reading by previous reponder's is somewaht true.

The preferred car to drive as an Executive is a Buick (made in China) - it is the most desired car there. The wealth of course is one sided.

China has been practicing what they call is "ONE POLICY, TWO SYSTEMS". In essence, they are allowing their populace to practice true Democracy - allowing people to be Capitalistic, sell anything on an open market (within China) while also practicing Communism. So...both Democracy (Capitalism) as well as Communism are the 2 systems in place - more dominat in the coastal area's. Western China is in poverty though.

Housing (brick and mortar) is up to the individual, but most workers live on the factory owners land. Land however - is owned by the Government.

You lease it from them in increments of 25 to 50 years. If you outsize your leased land, or want less, you sort of trade it off - with the permission of the Government.

Food is part of the wages too. The factory housing and food is part of the equation.

In this past year, China has made about 4 million cars. The Government too, controls the output, as Gas and Oil are becoming in short supply. In particular, even owning a bicyle is considered "a modern transportation" vehicle. You'll find many many vintage bikes there. People either ride a bike, or walk. The more middle class uses underground subway systems.

Japan has been dependant on oil from China and this is the first year where China will officially cut them off - which will create havoc on Japan, boost the oil prices there, and cause oil prices all over the world to sky-rocket.

I think I once stated that at the idustrial level, as well as the wage level, I would say that they are at about the same level as we here in America was - that being dated as about the early 1920's.

posted January 25, 2004 06:38 PM               

On February 28, 2003, a number of companies in the areas of plastics and packaging
met with Alison Nankivell, who Export Development Canada's representative
based in China. Here are some of the noteworthy points that were discussed
for companies interested in exporting to China.

* 2003 represents the second full year of Chinese membership in the World
Trade Organization and it is expected that there will be a smoother
implementation of their obligations under WTO, such as tariff reductions,
liberalization of non-tariff trade barriers, and regulatory reform.

* The rules regarding formation of joint ventures are being relaxed, with
delegation of approval authority having been pushed to lower levels of
government, which means faster approvals.

* This will be a year of big political change with the selection of a new
President and a new Prime Minister. This type of change at the top is
always accompanied by a significant change in Ministers and other senior
positions at the same time. China is also moving toward the establishment
of a more professional civil service, and a bigger separation between civil
service and political influence.

* According to the Economist Intelligence Unit, projected growth rates are
7.6% for 2003 and about the same for 2004.

* In 2002 China became top destination for foreign direct investment
surpassing the US for the first time. Total FDI was US$53 B, a 20% increase
over 2001.

* The Olympics in Beijing in 2008 and next World Trade Fair in 2010 in
Shanghai will be important growth drivers.

* Urban income is growing at 8-10%/year. However if you travel 20 miles
outside Beijing you are in a very low wage environment and very low standard
of living. It will take a very long time for wage inflation to become
significant as companies can keep moving farther into the hinterlands to tap
into low cost labour.

* The hourly rate for unskilled labour can be as low as US$0.60/hr compared
to $2.50 in Malaysia and $5.00 in Singapore. There is also a huge supply of
this relatively skilled labour exists. An engineer might make US$10,000/yr.
Few complaints on the quality of the labour force are heard.

* Personal consumption pattern has jumped dramatically. Notably, the
beverage sector has taken off, as has the demand for food packaging. Food
for the domestic market is typically served by cheaper local packaging
producers, but product for export is still served by imported packaging for
aesthetic reasons. The number of personal cars purchased in 2002 grew by
56% compared to 2001.

* China has the capacity to manufacture most of their needs in the low and
mid-tier range moulds. Demand for imported moulds to satisfy the high end
remains strong, but this is changing quickly too with technology transfer
into China, either directly or through joint ventures.

* For most companies, it is advisable to start in China through direct
exports using a local agent, and not to jump directly into local production
too fast. However, the long-term solution is to have some sort of
investment in China for production.

* The use of advanced manufacturing technologies and sophisticated equipment
remains a competitive advantage for western companies for now.

* Intellectual property infringement in China is a definite risk, and
precautions should be taken to try and protect against having your product
reverse engineered and copied.

posted January 26, 2004 08:16 AM               

Thanks,

posted June 15, 2006 11:59 AM               

A first year graduate engineer in Shanghai will earn $600 per month, and live a 2-hour bus ride away, on the outskirts of town (I can commute from Akron Ohio to Columbus Ohio, 110 miles, in that time). An American or European company will hire him away in his or her second year at $1000 or $1200 per month. He will probably move into town, and go from paying $30 per month rent to $300 per month. That’s in downtown Shanghai (think London or NYC). He will complain bitterly about how expensive Shanghai is. BTW, he is the first in his family to go to college and his parents do not even have high school educations.

Most factory workers in Shanghai also make a 2-hour bus or train ride each way to work. They come from families that are subsistence farmers, and do not show up in the GDP numbers. They live in areas where everything they need is within walking or biking distance. A $5 per day job vaults the family into the consumer economy. As is the case in Sri Lanka, Thailand, and many places in India, the amount of pay we consider exploitative they consider life-saving.

In Shanghai I have breakfast in a noodle shop for 65 cents. That gets you a BIG bowl of soup with rice noodles, meat and veg of your choice. They say that’s expensive because back home you can buy the same bowl for 30 cents. A 600ml bottle of Qingdao beer is 60 cents at the Shanghai 7-11. That’s also high compared to half the price outside town. Dinner for 2 at a local restaurant is under $10, even eating at the top of the menu (you’ll end up paying over $30 at Hooter’s or Outback, however). I stay at the 4-star Park Hotel at People’s Square for about $100 per night. A comparable hotel in Shandong is $35. When you hear people say Shanghai is expensive, keep it in context.

That is a great segue to introduce “purchasing power parity”. Purchasing Power Parity adjusts the wage rate according to how much it will buy, compared to other countries. . GDP per capita in China is about USD 1,500, while on a PPP basis, it is now about USD 7,200. That means for $1 they can buy stuff that we would pay $5 for. At the other extreme, Japan's nominal GDP per capita is around USD 37,600, but its PPP figure is only USD 31,400. They pay a high price for being on an island.

So what about all this government manipulation? Japan has MITI to erect trade barriers that increase the cost and limit the scope of imports while collaborating across all segments to boost Japanese product exports. Germany as well has effective and active collaboration between government, industry, banking, and the universities. As others have pointed out, China has a free-market economy, but one that is controlled by a totalitarian government. The government can and does confiscate property, tear down buildings, and build office towers, apartment buildings, schools, and highways. Within 10 years everything in the major cities will be new and modern, including the transportation infrastructure. They dictate growth targets for domestic industries. They control foreign exchange (availability of dollars and euros for companies to buy foreign goods). It makes me wonder if the Chinese system (benevolent dictatorship) will somehow out-perform the US capitalism system. It seems we have signs that our government is drifting that way.

It is ironic that the oldest civilization is also the youngest child in terms of domestic economic development. Beginning in late 1978, China reformed the economy from a Soviet-style centrally planned economy to a more market-oriented economy that is still within a rigid political framework under Party control. During the 1980s, economic reforms helped lift millions of people out of poverty, bringing the poverty rate down to 12% from the original one-third of the population. Chinese economic development is among the fastest in the world, and has been growing at an average annual GDP rate of 9.4% for the past 25 years. In 2005 China became the fourth largest economy in the world by exchange rate, and the second largest in the world after the United States by purchasing power parity at US$8,158 trillion. This year, China will overtake Germany as the third largest auto maker in the world.

That's probably more than you wanted to know.

posted June 15, 2006 10:14 PM               

Nice to see you on Feed Screw Designs.com. In case you didn't realize it, we know each other. How is the Mercedes holding up?

Seems to me that the Chinese were held as slaves to the Government for 40 years, and are now let loose to earn enough to qualify as poor in western countries. This repressed labor "resource" is now put out on the open market, and somehow everyone involved feels fortunate to participate in exploiting the resource.

In the US we interned some Japanese for a couple of years, and the concern over compensation for that never ends. But because we, and everone else, wants to get rich off the Chinese laborer the reasons for the whole situation are ignored.

That is not the only force at work. There is a prodution "Arbitrage" going on which will not last forever. Not to mention the Chinese goverment's poorly hidden military aspirations.

I know some companies investing in China right now, and I with them luck. China is an artificial economic abberation cause by an unfortunate political history and capitalistic opportunism. I still see it as a bubble that may burst, or may just deflate over time. However this bubble is leaving a lot of devistation in it's wake.

Tom C

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Best Regards,

Tom Cunningham