As someone who has spent the last year disentangling a manufacturing supply chain from China — we did, and we also cared about the IP protection concerns in China. These circumstances have us the air cover to move forward with long discussed and to leave China, with little to no impact to our ability to conduct business in the country. Its not a nice reality, but that’s what it is.
> As someone who has spent the last year disentangling a manufacturing supply chain from China
What did that entail? Details welcomed!
I'm currently finishing up my Final on my Supply Chain Operations course and the focus of my research paper is the low quality PPE manufacturing that has been centralized in China, specifically the provinces outside the city outside of Wuhan, which are currently undergoing massive flood damage and causing massive disruption and delays:
My proposal is entirely theoretical, although I do conclude with utilizing possible intermediaries (currently operational) in Hong Kong and Taiwan that can support a portion of the demand as they did during the initial outbreak in January, but it currently remains an entirely unsubstantial amount of daily output to compete with China (when its fully operational) for all of the entire Western Nations needs that are currently undertaking sanctions against CCP/China. I make the argument of questionable tolerances in QC/QA, which when dealing with PPE can be deadly and a critical point of exposure to spread and increase overall infection rates.
I'd like to hear what Industry/Sector you focused on and any significant roadblocks you may have encountered if you're willing to share.
China's spent the last decade or so repositioning itself in the global manufacturing chain to be closer to the US's position. ie. using it's manufacturing and logistics experience and capital to create Chinese brands that they can control and be known for. And as a corollary, less of an emphasis on bottom of the barrel manufacturing as a commodity. Essientially they want to be known for brands with higher quality like western brands are, _and_ keep high skill manufacturing like Foxconn, but push out low skill manufacturing to the south China Sea and eventually to along their belt and road initiative (and maybe Africa). They really want no part of low margin manufacturing anymore, having developed enough for it not to be worth it for them.
You can see the main thrust of this initiative under the "Made in China 2025" initiative.
I can understand the initiative, but they also have 1 billion people. There is no way they uplifted that many people out of the lower economy yet. Companies determining that the cost of Chinese labor as not cheap enough due to even a slight increase in price still sounds like immense greed.
You could make the same argument for the US's 350M people. Why would we give up sweat shops when there's homeless and unemployed? Because we view their existence in our economy as an overall downward pressure on average standard of living.
I’m no expert, but it’s probably not possible to move manufacturing to places where labor is still cheap in China. After all, the country is huge, and concentration/proximity to shipping routes matters.
According to one source, around 400 million people in China live in poverty .
If anything, their policies over the last 40 years were effective at raising many people out of destitute poverty. That said, there's enough people doing well enough that competition for the worst jobs is decreasing, forcing wages higher.
Coupled with China's disregard for basic IP rights, environmental regulations, worker protections, and other rights we in the West fought for over the last century and beyond, it's no wonder people are jumping out while they can.
No company exists in isolation. Other countries is SE Asia have lower cost labour further down the skills ladder, they’re available and willing to work, and your competitors may well already be operating there. Stay in China in those circumstances and you’ll be uncompetitive.
This is not a bad thing. China has successfully climbed up the value chain, as Japan, South Korea, Taiwan and Hong Kong did before them. Now it’s the turn of other countries like Vietnam. It’s how hundreds of millions of people have risen out of poverty.
China hasn't competed on labor cost for a while. They now have the largest concentration of manufacturing and tooling skill in one place.
Cheap labor seekers are going to cheaper parts of India (but that won't stay cheap for long), Africa, Indonesia, etc. Africa is establishing some kind of union to reduce concerns about stability, and if that works we will see the 80s-90s in China repeated there.
Someday there won't be any large pools of cheap labor left. Unless automation is much cheaper by then, we will see massive inflation in manufactured goods.
Also: if Africa industrializes and we don't have cheap fossil fuel alternatives, we should just start moving Miami and building the New York Sea Wall. Another half billion to billion people will be joining the new global middle class, and after centuries of colonialism Africa is not going to listen to Westerners asking them nicely to stay poor so we can meet a CO2 target.
I think your points are generally right but vastly oversimplifies the situation.
>1. Educated people (most former communist countries have fewer analphabets than the US)
Literacy != education. In the USA, we used to talk about the 3 R's: reading, 'riting, and 'rithmetic. That's the base level. I would equate education with higher-level thought processes developed in college. Re communist countries: yes, this is where communist control can be effective, but it also stifles creative thought (are you really sure the state's education regime is correct?)
>2. Tons of people
Certainly helpful, when used correctly. Definitely drives the cost of labor lower, though (simple supply-demand relationship).
>3. Infrastructure and clustering.
To an extent, sure, but the infrastructure development is more a consequence of the large amounts of people. Also, you get more bang for the buck when you build infrastructure there because so many people now live in population centers.
>4. The political will to move forward.
This is the primary point I would say is wrong. We have plenty of political will in the USA. However, we also have much clearer legal separation between private and public companies. The CCP holds a very different view on how private companies should exist. We in the USA theoretically can block companies from operating in certain countries, but we choose to not do so in most cases. Liberty is much more protected in the USA, which may hurt short term but works best long term.
As to your projections:
>won't see this in Africa
I presently agree, but no one expected China to do as well as it has 50 years ago.
>India is possible but unlikely
As China and India continue their border clashes, they will grow more distant. I expect the West to align with India than China, given than Indian values more closely align with the West.
They can do jobs which don't require high literacy rates. Farming is such an example. The USA has plenty of Mexican immigrants who don't know English yet are still highly capable at performing manual labor.
Also, as a counterexample to your point about former communist states leaving higher literacy rates: a Marxist-Leninist state existed in Benin until 1990, but they still have one of the lowest literacy rates in the world .
>Why should this be the case? The labor is probably lower in Benin. Yet, nobody moves there.
The principle is just supply and demand. If you increase labor supply and keep demand stable, the cost of labor decreases (on the other end of this spectrum, tight labor markets drive wages higher).
But considering why Benin isn't the manufacturing powerhouse of the world (with only 11.3 million people) is tightly coupled with political realities. For example: does their country need those manufacturing jobs? CAN the country support those jobs? Apparently cotton is 40% of Benin's GDP and ~80% of their official exports. Political instability in Africa generally hurts all other African nations. Perhaps the African Union will help them .
>All the suppliers and sub-suppliers that can work hand in hand.
Oh, clustering is highly effective. There's plenty of clustering in the USA as well. That said, the CCP has much more control over all industries, so they can force clustering with greater ease. Ascribing economic success to clustering oversimplifies the broader context.
>As a immigrant in both systems and a naturalized US citizen I tell you that this is not my impression.
Well, as a person born and raised in the USA and surrounded by hard-working immigrant family members, I attest otherwise. Mainstream news in both China and the USA is manufactured and does not reflect the reality of how people feel. People here want change, and it's coming.
The political will to move forward is a great counterpoint to my original post, and I disagree that the USA has a lot of that. If anything the USA seems ruled by an entrenched political caste wedded deeply to old ideas and old ways of doing things and much too comfortable.
A lot of people who don't ordinarily vote R voted for Trump in the hope that at least he'd shake some things up. (I didn't, but I can't blame them all that much.) Most of them are very disappointed and won't be voting for him again, but that leaves Biden who is yet another member of that same calcified political class.
Maybe we just have to wait for them all to retire or die off. Sad, but might be true. People can continue to learn and grow as they age, but it seems like a lot of people choose not to. At some point they decide they know everything and are right about everything and they just stop there.
I disagree about India though. India has loads of talent. They have corruption and other issues but so does China and so do we. Africa is further behind but I'm bullish on it over a long (25-50 year) time frame. Values and culture wise Africa is probably a lot closer to the USA than many people would imagine... or at least that's the impression I get. Africa seems to be slowly becoming politically stable, and political instability is historically the reason Africa has remained so dysfunctional. Who wants to invest in a place where the next perennial revolution might destroy everything?
>If anything the USA seems ruled by an entrenched political caste wedded deeply to old ideas and old ways of doing things and much too comfortable.
Replace "old ideas and old ways of doing things and much too comfortable" with "power", and I'll agree 100% percent.
>Most of them are very disappointed and won't be voting for him again
Based on my discussions with Trump supporters, I don't see that. In fact, they're very happy with his performance and feel his job is made intentionally hard because of political opposition. If anything, their resolve to vote for his has been strengthened.
Also, these people will NOT vote for Biden. They watched him during his past decades in politics and can see his mental decline clear as day. Voting for Biden is basically guaranteeing Section 4 of the 25th Amendment will be invoked for the first time ever.