rss feedChina’s export market steps up competition – and the country has more billionaires
More evidence is emerging about how the global recession and China’s influence in the world economy are reshaping trade, consumption and business.
David Barboza of The New York Times filed this dispatch, explaining how Chinese companies are gaining in the export world by “aggressively reducing prices” and partially because of an end to textile quotas in many countries.
Economist Nicholas Lardy told him that many Chinese companies are quick to react to market changes.
Those in China who are probably feeling these fast-changing pinches are members of its “floating population” – migrants who come from villages or poor mountainous areas to find jobs in garment factories.
Noted Barboza:
One reason is the ability of Chinese manufacturers to quickly slash prices by reducing wages and other costs in production zones that often rely on migrant workers.
In his story, he quoted Liao Yuan from the Southern China-based Changrun Garment Company about some buyers in the new global economy:
The buyers are getting more and more tough in bargaining for lower prices, especially American buyers….They offer $2.85 per pair of jeans for a package of a dozen, when the reasonable price is $7.
This again shows how a new “American price” - which I define as considerably lower than before – for goods is emerging from the ashes of the recession.
I’ve written about this concept, which takes into account ”The China Price” – which incorporates low production costs.
Negotiating for the lowest wholesale price makes sense for a buyer who wants to give the U.S. consumer an incentive to open a wallet and make a purchase.
Take, for example, those Chinese-made jeans: U.S. buyers want to buy them at 59 percent less than the price the Chinese manager wants.
Yes, Chinese companies are willing to slash prices.
But will the Chinese manager agree to that price cut just to remain competitive and knowing there are other clothing manufacturers in China and the world?
I wouldn’t be surprised if U.S. buyers also are using strategies that Chinese business negotiators might have used in the past.
While you ideally want a smooth business relationship in the international arena, there are times, well, when things get tough.
Reuters released a report by Ben Blanchard, noting how the number of dollar billionaires has grown in the world’s third-largest economy, which might eclipse Japan for the second place spot next year.
The United States has 359 people in this category, Blanchard reported. But China’s number increased about 29 percent from 101 people last year to 130 this year.
These market responses and shifts, in a sense, are fascinating to watch.
It certainly would be interesting to note how billionaires on the list earned their fortunes.
And I realize that many people around the world are feeling pain because of the poor economy.
But these quick changes are not a complete surprise given the way that free marketers can view nearly everything to be an opportunity – despite the moment in history.
That philosophy can yield profits, which people who benefit like, as well as social costs from those on the losing end.
Migrant workers at clothing factories in China obviously don’t want to take a pay cut, especially if they have families to help in their home cities.
They might not be earning a great deal of money in the first place compared to how much that clothing might end up selling in other countries.
And around 1998 or so, after the Asian Economic Crisis, I remember that some bankers and investors from Wall Street boarded airplanes and flew to Asia.
For competitive prices, they snapped up businesses that had collapsed or fell victim to crony capitalism.
This interesting news of progress – or at least, marked competition – in China, on both the lower and higher ends of its economy, prompts one thought that I’ve been thinking about for years.
China has the world’s most populous country. Nearly everyone in the country is aware of hyper-competition within their borders.
Think about those photographs of students preparing to take college-entrance exams or getting information from recruiters.
Parents rent hotel rooms closer to testing centers and accompany their children to the big day.
Yet, China still has enough workers to flock to garment factories.
So: Is it possible for the Chinese economy to simultaneously make strides in lower- and higher-end sectors, such as manufacturing and sophisticated research, given the way Chinese leaders are embracing the free market?
There was a school of thought, say about five years or so ago, that if lower-end manufacturing migrated to Asia, the United States could still focus on higher-end research and design, given its comparative advantage with higher education and human capital.
What I think is happening, though, is that people around the world, and especially in the United States, are seeing China – or parts of it - improve at a very rapid clip.
The Chinese economy has undergone painful changes in its past. Years ago, government leaders shut down numerous, old-style factories, especially in Northern China.
But with this round, it looks like government leaders in Beijing are pursuing a measured strategy of economic stability and growth.
UPDATE POSTED WEDNESDAY: If you didn’t see, it looks like a resident from China has set a Hong Kong real estate record by buying a luxury apartment for $56.5 million, The New York Times reported.
As we all know, the value of something is the amount you’re willing to pay for it.
