Not happy for happy meals
By Nathan Green November 14th, 2006To borrow a phrase from Comedy Central television host and comedian Stephen Colbert, China makes America’s happy meals possible. This has long been the case, although America has long since ceased being happy about it.
Finding a China-basher in Washington is about as difficult as finding a haystack in a needle, at least among political, labor union, and red neck circles. The gist of their argument is that China has used its cheap labor and even cheaper currency to feed a US market hungry for its cheap products.
The China-bashers have a simple solution: RMB appreciation. If Chinese goods cost US consumers more, it would make it easier for US businesses to compete. The only other solution they can imagine is protectionism. (Interestingly, pressure on China to raise minimum wages, workers conditions and the like, and therefore export prices, has always been rather more muted. Given that a large part of China’s trade surplus with the US is driven by US manufacturers taking advantage of cheap Chinese labor to maximize shareholder returns back home, this sounds a little like the US wants to have their happy meal and eat it too.)
But while the US has been busy banging on about cheap plastic happy meals, China has been moving up the value chain. In my inbox yesterday was this from Global Sources. It seems that China is no longer content to just make the toys to sell happy meals, it is now also concentrating on making the tools to make the happy meals that its happy meal toys sell.
According to Global Sources, China’s exports of cooking appliances grew 27% to US$801 million in the first six months of 2006, and 60% of manufacturers plan to raise prices over the next 12 months.
This is partly to offset rising prices for steel and brass, but with Chinese ovens in such hot demand, pardon the pun, it is also partly because they can.
They are certainly not settling for cheap ovens for poor Americans. “Manufacturers are producing value-added models to gain a bigger share of the midrange and high-end markets,” said Global Sources general manager of Content Development Michael Kleist. “Due to rising energy prices, a growing number of suppliers are also focused on producing energy-efficient models.”
It is not just ovens. You name it, China is trying to produce it, and produce it better than anyone else, not just cheaper.
Washington’s China-bashers may just about be getting what they wish for. As China’s exports rise in price, they will be expecting to see a surge in production back home. The question is will they, or will they just pay more for the same goods they paid less for before?
That is where my money lies, and the argument holds whether it is import tariffs or value-adding on the Chinese side that causes the cost escalation for American consumers.
The US needs to start looking at its own expanding waistline and stop blaming its failing health on those who feed it.
A good place to start is with toys for happy meals (metaphorically, perhaps, rather than literally). It should start making its own again, and perhaps export any surplus to help boost China’s expanding domestic girth.
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November 15th, 2006 at 12:50 am
Well consider the fact that in the west in my opinion, there are only 4 types of ppl regarding their knowledge and their stance of China.
1. China Bashers
2. Panda Huggers
3. Those who just doesnt care.
4. Those who knows, but are ignored or pretend they dont know.
RMB apperciation is definetely not the solution as i dont see why Chinese farmers have to pay for “stupidity” of the general american population using more than they can afford, and sadly the US government itself is doing nothing to stop this trend, but its printing more and more money to continue this trend, which IMO in the end will only lead to the ultimate collapse of the USD.
1. Like Dr. Marc Faber said, even if The RMB apperciate 50% it wont do much to close the deficit. As Chinese are still big savers. Not to mention in “socialist” China, people dont get free education and medical care (So much of socialist, although in a economic point of view this may be the only way) pushing people to save more.
2. The west are barred to export many items that they deem “risk” to China. Sometimes these items include some sort of part used to make a missle (most probably China has already had that part from the Russians ages ago).
3. Despite this may hurt my investments in stocks, but all I have to say. STOP SPENDING MORE THAN YOU CAN AFFORD. What the US gov’t and even many of its citizens are doing is simply getting themselves in to more and more debt. Lets just put it this way most of the westerners i know in my age dont save a penny, they work but they end up speding more than they earn, so it has always be hard for me to comprehend their spending habits. On the other hand the US gov;t is just simply printing more and more money to pay off its debt, well printing more cash definetely wont solve the problem forever. Maybe loosing 50% of its value in the last 2 decades should have some warning sign;s popping already right?
4. Obviously only Henry Paulson master Chinese politics. Dont force or threat….. the more you threat or force the more hardline a chinese get for FACE. (Well for all asians). The best solutions is for capitol Hill to SHUT UP and let paulson do his job. This is the fastest way possible in my view that RMB apperciation will be sped up. Continuing the point, obvious capitol hill hasnt offer anything to Chinese for an exchange. I will bet all my assets that the central govt will only resist more to your “demand”, the PRC is officially a captialist gov’t, obviously they dont do things for free, they will atleast expect some return, perhaps easing technological exports to China? Or even supporting Anti Ah Bian movement in taiwan?
5. Beijing has more important things to deal with than the trade deficit. eg overheating economy, policies from the Zhong Nan Hai not being enforce by local gov’t, pollutions, and most importantly of all internal conflicts although it seems Hu 80% done already getting rid of his threats. So maybe US making it harder to invest in China isnt such a bad thing after all, since the PRC govt is being flood by too much cash anyway (Sacrastic but true)
6. Lastly my Chinese xenophobia made me say this. HOW MUCH U OWN US AGAIN?. you know all those Tresuries and bonds? I am not sure how things work over there, but my knowledge normally tells me that the one oweing money, shouldnt really be pissing off the person they owe to. Although a immediate sell off of its US assets in its $1 trillion reserve is unlikely. But the recent comment made by Zhou Xiao Chun (cant remeber the exact name) pretty much means the China is going to stop accumulating the US assets to its reserves and will gradualy try to diversify its reserve to other assets. Personally I favor Silver but thats another story.
Conclusion.
I am not totally against a RMB apperication, but to put all the blame on the Chinese side is just BS. The US played the major role getting itself in this situation. IMO the RMB should apperciate around 4-8%. China itself has alot to shoulder if it does appreicate, most likely an free float will lead to the end of the China economic miracle, and to the so called communist their down fall. The Poor has already had enough of the BS from the gov;t, an RMB apperciation will literally make their lives even harder, basically a free float is nothing but a suicide to the central gov’t.
But in the end why should chinese poor pay for your bad spending habits of americans?
So perhaps US and many other western nation needs to follow suit. That increase spendings is important, but spending more than u can afford is suicide in the long run. Maybe its time for the west to learn how to save, instead of spending spending and more spending.
I read a article a couple months ago. The reasercher who was trying to find common trends on all economic miracles/boom, found nothing common, except when a country/place economy starts to boom the only common thing they found was that the general population saved most of they money. If my mind is correct the more they save the stronger the boom is. The report shows that when the american economy started booming the american population saved 60% of their money, but now the american population is only barely making it to 20%.
# China savings up to 50-60%, While India 80%.
November 15th, 2006 at 1:03 am
But of course in the end i China completely innocent of course not.
A little apperciation is good for the chinese poor, but a free float (The RMB is weak face it), leading to speculation, is pretty much going to end the poors income.
A point i missed.
I know Chinese made some of the cheapest of low quality products in the world, but to deem everything made in china as crap is stupid. As the last time i heard, not only are China interested in keeping the price low, they are trying to find ways to make things of better quality or even top notch at cheap price. Perhaps the west should also follow suit, instead of making everything (even outdated computer models) so darn pricy. Well besides from Chinese auto industry I dont see an industry making 100% crap. Well consider the fact that more and more of our electronics, textile, foot wear industryies are OEMing our products to western giants, I honestly doubt the Made In China Stands for poor quality anymore. Its just following Japan, taiwan, and South Koreas foot steps, but alot faster.