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The China Price

Aside from some wonderful times spent this weekend with friends and family, it’s been a somewhat disturbing Independence Day holiday as I’ve caught up on some current reading.

For example, yesterday’s New York Time Sunday Magazine had a sobering article by Ted Fishman titled The Chinese Century.

In a recent policy brief for the Carnegie Endowment for International Peace, Sandra Polaski, a former State Department special representative for international labor affairs, writes that to put things in perspective, ”if all U.S. jobs were moved to China, there would still be surplus labor in China.” That fact highlights what is most sobering about China’s booming economy: it can force down the value of work in any job that is at all transferable.

In American business this is called the ”China price.” It is the price American suppliers to other American businesses have to match to keep their customers. It is the price at which Chinese manufacturers can deliver the same goods and services. Last November, the Chicago Federal Reserve Bank noted the complaints that ”automakers have reportedly been asking suppliers for the ‘China price’ on their purchases.” It also observed that U.S. suppliers had been asked by their big customers to relocate production to China, or to find subcontractors there.

Elsewhere, Fishman cites repeated examples of Chinese suppliers applying low cost Chinese labor, not high technology, to achieve their “China prices”. There’s a double whammy for America involved:

China hits domestic U.S. manufacturers twice,” Oded Shenkar says. ”They drive down the price of goods, but they drive up the price of raw materials. It’s a wholly different environment.” And yet it’s a good one for Americans too.

Even while China consumes more of the world’s resources and commodities, it’s “good for Americans” because China continues to drive prices (at your local Wal-Mart!) down.

Fishman’s ending comments provide an appropriate juxtaposition to consider:

That doesn’t necessarily mean things will be worse for Americans as the century — the Chinese century — unfolds. Following World War II, the nations of Western Europe, Japan and the so-called tiger countries of Asia rose from the ruins, aided, not thwarted, by the strength of the American economy. In turn, those economic booms fed our own.

So perhaps we will be as Europe is to us today, and China will be our America.

In other words, as Europe is to us, America is to China — in this, the “Chinese century”.

So, what’s your “China price”? You can expect to be asked for it sometime very soon!

Oh, if it were only that simple! Somewhere, out there, are all of the others who view us only as infidels. For more on that, see David Remnick’s piece in the current New Yorker: “Going Nowhere“.

As is dealing with the realities of China wasn’t enought, are you ready to quickly understand the realities of our situation regarding petroleum? I picked up “Out of Gas” by David Goodstein as I was spinning through the library on Saturday morning and highly commend Goodstein for providing a brief, direct, and thoughtful summary of our current situation re: petroleum.

Independence Day. 228 years of freedom and liberty. What lies ahead? Reagan was credited with ending the Cold War. All of that now seems just so simple, doesn’t it?