The End of the Big Business-China Love Affair

[Guest Tony n Terrific]

The economic romance between the world's most populous nation and the biggest multinational corporations is nonetheless on the rocks now.

 

http://www.time.com/time/magazine/article/...=rss-topstories

[Urkidding]

The honeymoon is over!

[Urkidding]

The honeymoon is over!

 

But we don't want to accept the truth...

 

US wants closer economic ties with China!

[Sebastian]

Urkidding - I have a great short term solution.

Have China actually pay for all the licenses for all the software that is used illegally in China, back to the US Software Manufacturers, by turning over the T-Bills that China has, back to the US Treas Dept .

At last count, it'd be a 1:1 swap, you betcha !

 

WHOOP!

[Urkidding]

Urkidding - I have a great short term solution.

Have China actually pay for all the licenses for all the software that is used illegally in China, back to the US Software Manufacturers, by turning over the T-Bills that China has, back to the US Treas Dept .

At last count, it'd be a 1:1 swap, you betcha !

 

WHOOP!

 

It sounds good, but they already have the software...why pay now!

[Guest ShaQuaNew]

I remember during the 70s and early 80s, that it was quite common to see large groups of Japanese businessmen travel from one US corporation to another to observe their manufacturing methods. These groups would walk through and watch every little detail of what was going on. These were the days when if you owned a car that wasn't made in America, it was called a "foreign car." You had to look hard to find a dealer or mechanic who would work on your vehicle; not only because the parts were hard to find, but because the damned thing had metric nuts, bolts, and threads. A nightmare for most mechanics in those days.

 

Today, those very Japanese people went home to create the best selling cars in the world, and are now innovating new manufacturing techniques. They came over, and maybe shared a few glasses of wine, made love, and then left without saying goodbye. The same sort of thing has already happened with China, except they slept with us and we didn't even realize it.

 

The U.S. investment banks that have been China's biggest boosters are not the powers they were two years ago. And in China, the troubles of the U.S. financial system have led to a growing mistrust of U.S. intentions and the American form of capitalism. The love affair was strange and overdone. The aftermath could be ugly.

 

That aftermath is starting to be felt, with the US economic crew trying to get China to buy more debt. China views the US like the over-spending brother in law, with champagne taste on a beer pocket income. The lending days are over, unless China views they will get more benefit from it than the US.

Edited June 1, 2009 by ShaQuaNew (see edit history)

[Bert]

It will be interesting to see if China emerges as the engine that drives the world. There seems to be many people selling the US short. It could happen, but I am not betting on it.

 

Over the last 2 1/2 years, I have met numerous Westerners in China. Most all of them have two things in common: 1. They love being in China; and 2. they believe China couldn't stand on its own without Western assistance.

 

China has a very real lack of middle managers. They say it is due to the Cultural Revolution. That is one problem that has to be solved. Another problem that puts China at a technical disadvantage is its labor laws. People change jobs way too often and they don't pick up the experience that companies need. People are astounded when I tell them I have been with the same company for 25 years. I've been told and I don't know if it is factually true, but at our company half the employees quit and go elsewhere every six months. All I know is that the turnover rate is very high. It makes it frustrating trying to train someone. In less than one year, we went through 3 technicians. They were mostly good, but they lacked experienced, despite being well into their careers. There are probably 30 engineers at one of our facilities. Three of them are Filipino. The Filipinos get 90% of the work done. The others are busy as hell, but I never see them doing anything. There is a notion that engineers don't go on site. You are supposed to stay in your little office all day. My ex-Chinese girlfriend, also an engineer, used to chastise me for working on site. She had only worked on site once. She doubted whether or not I was a real engineer.

 

I just have my doubts that China will replace the US as the engine that drives the world. China needs the US at least as much as the US needs China, IMHO.

[Guest ShaQuaNew]

Very interesting observations, some of which I agree, and others not. Please see my comments in red italic:

 

 

It will be interesting to see if China emerges as the engine that drives the world. There seems to be many people selling the US short. It could happen, but I am not betting on it.

 

Over the last 2 1/2 years, I have met numerous Westerners in China. Most all of them have two things in common: 1. They love being in China; and 2. they believe China couldn't stand on its own without Western assistance.

 

Trade is important to China, and the US is the most important trading partner in that mix. If the US dropped off the radar, there are other countries emerging to take their place. It would have a profound effect if relations become damaged between the US and China, I worry that may happen as the economy worsens and each country takes steps to protect its own people.

 

China has a very real lack of middle managers. They say it is due to the Cultural Revolution.

 

I'm not sure to whom you are referring when you say, "They say." Everything I've seen in China has shown me not only top-not middle managers, but top-level executive, and workers at every level. Excluding the technological advantages the US now has over the world, China is not only on pace, but surpasses the US. Most of the workforce is very young, but very capable, highly educated, with a good deal of life experience. I will say that problem solving skills lag behind those you see in many US companies, but they are learning rapidly.

 

That is one problem that has to be solved. Another problem that puts China at a technical disadvantage is its labor laws. People change jobs way too often and they don't pick up the experience that companies need. People are astounded when I tell them I have been with the same company for 25 years.

 

You are a rare exception in America, with most Americans changing jobs every five years or less. Chinese business knows the value of keeping employees with experience. I don't see any job hopping going on over here, certainly not to the level what I experienced in the US. For the longest time, Americans knew they could increase their salary with a well-timed job change. Not so much different over here. Companies offer bonuses and other incentives to keep their people on-board.

 

I've been told and I don't know if it is factually true, but at our company half the employees quit and go elsewhere every six months. All I know is that the turnover rate is very high. It makes it frustrating trying to train someone. In less than one year, we went through 3 technicians. They were mostly good, but they lacked experienced, despite being well into their careers. There are probably 30 engineers at one of our facilities. Three of them are Filipino. The Filipinos get 90% of the work done. The others are busy as hell, but I never see them doing anything. There is a notion that engineers don't go on site. You are supposed to stay in your little office all day. My ex-Chinese girlfriend, also an engineer, used to chastise me for working on site. She had only worked on site once. She doubted whether or not I was a real engineer.

 

I just have my doubts that China will replace the US as the engine that drives the world. China needs the US at least as much as the US needs China, IMHO.

 

Hard to predict what will happen, even six months from now, but it does appear the veneer is wearing thin on the US perception of doing everything faster, better, and more efficient.

[Daviation]

All very interesting observations.

 

But one important, and recent, statistic (reported by The Econimist - don't have time to find the link right now but I could later - and they are usually quite accurate) is this:

 

China's shipment of goods to the US now represents only 5% of China's GDP... meaning we could drop off the face of the earth and their GDP would drop by a measely 5%.

 

Not sure it can be expected that they need us so much any more.

[knloregon]

Daviation is correct. The idea that China, even in the pre-US meltdown era absolutely needed the US was folly. Even when the the goods were coming hot & heavy to the US, China was building export partners to under-cut that dependancy. To the point that the Euro-states surpassed the US just before the meltdown. But even then, the WSJ reported that the GDP of China dedicated to exports was somewhere in the area of 8-11% as I recall.

 

China's big time GDP is domestic, and particularly in the area of infra-structure improvement. And now that China's stimulus package is kicking in, its even more the case. China doesn't wait for 'shovel ready'---it just forges ahead.

 

I would submit that the young work force, changing jobs on a regular basis will eventually pay off in a huge way. Just as you say, you train them, then they move, but they don't forget their training...

 

Can't see how the Cultural Revolution has anything to do with mid-management at this point, since it was over by 1978, making those employees dinosaurs, way behind, and ready to retire anyway---passed by by multiple generations of young Chinese.

[Daviation]

 

China's big time GDP is domestic, and particularly in the area of infra-structure improvement. And now that China's stimulus package is kicking in, its even more the case. China doesn't wait for 'shovel ready'---it just forges ahead.

 

passed by by multiple generations of young Chinese.

 

Add to this the fact that China actually HAS the money for their stimulus package. It is, in fact a true stimulus... meaning an investment with money they've saved.

 

We'd better stop spending what we don't have, and expecting China to keep loaning us money to fund our mis-guided ways.

[knloregon]

Excellent point. An investment in infrastructure, rather than borrowing against the future---for a bundle of vague, 'favorite son' projects.

 

So often, China is 30-50 years behind the US culturally---and this is a perfect example. In the 1960's we began the largest public works project of the time---the interstate freeway system.

 

But we did it from a position of economic strength (like the Chinese today) At a time when our products were the envy of the world, and our trade balance reflected that.

[Guest ShaQuaNew]

They're smarter than you thought, aren't they Timothy. I'm sure he now sees that the students of China are a lot more vocal than he remembers, and more inclined to say Bravo Sierra when a snake-oil salesman is in their midst.

 

U.S. Treasury Secretary Timothy Geithner on Monday reassured the Chinese government that its huge holdings of dollar assets are safe and reaffirmed his faith in a strong U.S. currency.

 

A major goal of Geithner¡¯s maiden visit to China as Treasury chief is to allay concerns that Washington¡¯s bulging budget deficit and ultra-loose monetary policy will fan inflation, undermining both the dollar and U.S. bonds.

 

China is the biggest foreign owner of U.S. Treasury bonds. U.S. data shows that it held $768 billion in Treasuries as of March, but some analysts believe China¡¯s total U.S. dollar-denominated investments could be twice as high.

 

¡°Chinese assets are very safe,¡± Geithner said in response to a question after a speech at Peking University, where he studied Chinese as a student in the 1980s.

 

His answer drew loud laughter from his student audience, reflecting scepticism in China about the wisdom of a developing country accumulating a vast stockpile of foreign reserves instead of spending the money to raise living standards at home.

Edited June 2, 2009 by ShaQuaNew (see edit history)

[Bert]

The US is still China's largest trading partner by country. It was said in many publications, including the Economist, that China is no longer dependent on the US and that the current economic crisis would have little impact on Asia in general and China in particular. They were wrong. It may be changing, but the US is still the world's engine.

[Guest ShaQuaNew]

The US is still China's largest trading partner by country. It was said in many publications, including the Economist, that China is no longer dependent on the US and that the current economic crisis would have little impact on Asia in general and China in particular. They were wrong. It may be changing, but the US is still the world's engine.

 

Horse Hockey. The only engine made in America costs three-times as much to make as it does in Japan, and five-times more than one made in China. The engine you're speaking of, ran out of oil and seized up.

 

Currently, the US imports more from China than any other country, but there are plenty of other countries that can pick up the slack. The following tables show there really isn't much made in America that China wants:

 

http://i41.tinypic.com/315zzbp.jpg

http://i44.tinypic.com/24czd03.jpg

Edited June 2, 2009 by ShaQuaNew (see edit history)