China pricing itself out of the market

On a sunny day (Fri, 08 Nov 2013 07:53:32 +0000) it happened Peter wrote in :

Economics is like water. When 2 countries do trade, it is like 2 vessels with different height of water connected. Living standard in one will go up and in the other go down, until equilibrium happens. The trade channel is the connecting tube.

So a point will come where you better (cost of shipping) can have things made locally. Also I am not convinced of the good influence on economics of the new 'leader' The previous one was an engineer, and China had great economic grows, this one is a ? with perhaps some other agenda it seems. We will see.

Wait long enough and US will be the new emerging market... LOL

Jan Panteltje wrote

Yes, very funny :)

Your analogy is very good I think.

The odd thing is that the Chinese will probably never realise what is going on. The likes of Foxconn will continue making stuff (with their

500k employees supervised closely by hundreds of US people seconded there from Apple, Nokia, etc and kicking ass as necessary) but the vast numbers of small companies will go bust. The place has close to zero innovation, close to zero "own products" other than trivia like HDMI cables. Half of China is not making anything but is reselling stuff made by somebody down the road, nearly everybody making anything "themselves" is actually subcontracting it and putting 30-50% on, and this is a very weak business model. Most firms there have not a single English speaking person and rely on somebody down the road (with a western educated person) feeding them business. The moment their final prices climb to western levels minus say 30% (the 30% is the average cost of shipping the stuff by sea, never mind by air) they will get shut off.

On a sunny day (Fri, 08 Nov 2013 09:13:30 +0000) it happened Peter wrote in :

OTOH China does some innovation, now for cellular uses a version of LTE that is not used in Europe, they did the same with the DVD format (China disk, CVD) probably to get away from the US and European patents, It is a big market and we like to export there (think cars and planes for example). While writing your reply it occurred to me WHY 0bama wants a free trade pact with the EU. It is because the standard of living in the US is dropping below that in the EU, and a free trade 'pipe' will benefit the lowest level. That is why I wrote _wait long enough and the US will be the new emerging market_. Did you know that guy in the white house just criticized Germany for having too much export? Maybe he is jealous? Germany has the largest trade surplus in years! :-) US is sliding into a third world country state, really. Leftist suck tube on European wealth is all 0bama wants.

NOT with Komrade Obama trashing the Constitution..

On a sunny day (Fri, 08 Nov 2013 09:55:03 -0800) it happened Robert Baer wrote in :

Especially with 0bama, US will be totally black poor, people living in grass huts, labor will become so cheap that capital will start to flow from the richer world, creating an new emerging market.

It's already happening.

But even as the cost of labor in China goes up, their big advantage is their lack of regulations. Well at least their lack of enforcement of regulations. This applies not only to labor, but to environmental and safety as well. If they ever decide that it's a good idea to have clean air and water then they would be uncompetitive as a low cost manufacturing center.