Sunday, June 24, 2007

Made in China

Chinese manufacturing has been in the news media lately. A few mornings ago, NPR reported on a recall of a popular children's toy manufactured in China. It was somehow just discovered that some of the paint that's been on these toys (for several years) contains lead.

Apparently, almost everything sold in the US now is made in China. When my computer was replaced by the Apple Corporation I was able to track my replacement's progress towards my house. Before making it to Austin, it stopped off in Memphis, Indianapolis, and Anchorage. It began it's journey, according to FedEx, in Shanghai.

The July/August 2007 issue of The Atlantic is all about US-China relations. The cover story is, as well, about the rise of the manufacturing industry in China. It's long, but worth it. I can email it as a pdf to anyone who wants to read it. Here, also, are some highlights.

...the Pearl River Delta of Guangdong province (the old Canton region), just north of Hong Kong. That one province might have a manufacturing workforce larger than America's. Statistics from China are largely guesses, but Guangdong's population is around 90 million. If even one-fifth of its people hold manufacturing jobs, as seems likely in big cities, that would be 18 million- versus 14 million in the entire United States.

The sheer speed and volume with which factories and power plants across China increase their output of soot and gases make the country's air-pollution problems the world's. The heightened competition for for oil, ore, and other commodities to feed the factories affects other nations, as do slapdash standards of food purity and safety, which may have led to tainted worldwide supplies of animal food.

Talking about Chinese industrial growth, Americans are in the position of 19th-century Europeans who acted as if America's industrial rise could be explained simply by its vast natural resources and its exploitation of immigrant and slave labor, plus its very casual attitude toward copyright and patent laws protecting foreign, mainly British, books and inventions. (Today, Americans walk the streets of China and see their movies, music, software, and books sold everywhere in cheap pirate versions. A century and a half ago, Charles Dickens walked the streets of young America and fumed to see his novels in cheap pirate versions.)

Since their home village may be several days' travel by train and bus, workers from the hinterland usually go back only once a year... "The people work hard," an American manager in a U.S.-owned plant told me. "They're young. They're quick. There's none of this 'I have to go pick up the kids' nonsense you get in the states."

Even some newly built facilities leave to human hands what has been done in the West for many decades by machines. Imagine opening a consumer product- a mobile phone, an electric toothbrush, a wireless router- and finding a part that was snapped on or glued into place. It was probably put there by a young Chinese woman who did the same thing many times per minute throughout her 12-hour workday.

These factories automate not what's too expensive but what's too delicate for human beings to perform.

The woman from the hinterland working in Shenzhen is arguable better off economically than an American in Chicago living on minimum wage. She can save most of what she makes and feel she is on the way up; the American can't and doesn't. Over the next two years, the minimum wage in the United States is expected to rise to $7.25 an hour. Assuming a 40-hour week, that's just under $1,200 per month, or about 10 times the Chinese factory wage. But that's before payroll deductions and the cost of food and housing, which are free or subsidized in China's factory towns.

The measures Americans most often discuss for dealing with China are not much better as a long-term basis for hope. Yes, the RMB is now undervalued against the dollar. Yes, that makes Chinese exports cheaper than they would otherwise be. And yes, the RMB’s value should rise—and it will. But at no conceivable level would it bring those Shenzhen jobs back to Ohio. At best it would make U.S. exports, from locomotives and high-tech medical equipment to wine and software, more attractive. Such commercial victories are important, but they are unlikely to be advanced by threats of retaliatory tariffs if China does not speed the RMB’s climb. Also, the faster the dollar falls against the RMB, the faster Chinese authorities might move their assets out of dollars to stronger currencies.

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