I talked to one of our suppliers yeaterday, whose product line is almost entirely Chinese-made tools. He told me that there are big changes afoot that will impact all Chinese-made items exported to other countries. As I recall, he said the tax rebate (?) has been changed from 100% to 50%, and that raw materials were being priorotized for their domestic auto manufacturing plants, with all other plants fighting over the leavings. He seemed to think Chinese goods would, at least in the short term, become harder to get and more expensive. Anybody else have any insight on this? Rex in Fort Worth
Look for a substantial steel shortage! I already see price increases with bigger problems around the corner. I hear that scrap is going to China and is hard to get. Therefore, EVERYTHING goes up. It's not enough to spur creation of more capacity or even more utilization of existing capacity, just enough to drive prices up and supply down.
Well, it was bound to happen, and is good news (mostly) to us. Any time some country starts exporting massive amounts of goods to us, or the whole world, all that capital starts piling up in that country. And then, their people start buying things, and it all comes back into balance. Just wait until the first foreign (to China) auto maker opens a plant to sell foreign label cars TO THEM!
Over the 1980's the Japanese Keiretsu drove a stake through what was left of the U.S. consumer electronics industry by making it difficult to impossible for the U.S. companies to buy the increasingly sophisticated subsystems that were the trademark of Japanese manufacturing innovation. The generic guts of CD drives, TV sets, cameras etc. Only the most profitable finished goods were exported.
Of course there were many other reasons too, many a reflection of our own HUA, not overt action in Japan. Like today, it all depends on one's perspective.
Anyway I give it 5 years to where we see the same thing in China. Today our booming economy (jobless recover) looks good on paper if you are CEO, just buy our parts there cheaper than we can build them here, put on the finishing touch and keep most of the profit in the U.S. It will become increasingly difficult to keep the profitable middleman operations here.
I will be surprised if we do not see a repeat of the experience with Japan, taking down what today are still healthy U.S. industries, that are all too happy to buy increasingly sophisticated parts. At first outsourcing their manufacturing, now outsourcing engineering, and tomorrow outsourcing themselves out of existence. Which industries will they be?
Yep, Steel prices are going up and some are implementing surcharges. China is paying a premium for scrap and supply is dwindling so we should start seeing increases on everything made of steel.
I have noticed that the Chinese are well on their way in doing that. They are going to standards that they own in things as Cell phone transmission so they do not have to pay royalties to foreign companies. I think they are going Linux for PC's.
They're making everything we used to make, and that requires a lot of steel. They're also modernizing like crazy, lots of new buildings, lots of new roads and bridges, the world's best machinery. Etc.
As Ed can probably tell you, they're actually running a trade deficit with the rest of the world. They're spending the surplus they have with us as quick as they can, buying the best of everything that they can (just not from us, because they don't like our prices, our quality, and our byzantine trade policies).
The surplus they run is being _saved_, not spent. That's a large part of the current global pathology. The savings is used to buy up American treasury bonds at a ferocious rate. True, this is done by a state actor to keep the RMB cheap, but the analysis holds no matter who does it.
This is the problem with Japan, as well. Lots of savings, that they can not or will not put into productive use at home, so they send it to us to finance our current consumption.
Particularly in the case of China, if these people actually cashed in their all their dollars for goods from us, that's like saying that they want payment in full, they don't want to defer all that consumption for some nebulous _later_ that never seems to come. And if you're CEO of GlobalMegaCorp, looking for a new factory site, you don't want to put it in a country where the people actually want to get _paid_ for all the work they do, do you?
This, of course, requires a willing partner on the other side of the Pacific, one willing to distort it's economy in exactly the opposite way. That's us.
Same analysis applied to S.Korea, Taiwan, Malsysia, India (You've heard of them recently, right?) and lots of others.
The upshot for this thread is that once you've done this to your economy, and put lots of people to work by doing it, it becomes very difficult to stop. That'd mean throwing lots of people out of work, and they might riot or even (the ultimate disaster) change the government. So I don't think that Chinese _anything_ is going to get markedly more expensive anytime soon.
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