Made in China?
by, 23rd-June-2009 at 10:47 AM (691 Views)
World Bank, OECD grim; glimmers from Germany, Japan... this piece of news kind of brought up a report I read not too long ago. That is, because of the dying of the US consumption, the export dependent countries such as Japan, Germany... and China will suffer. In another report, from UK as usual, the writer was kind of pointing his finger at China(not sure), Germany and Japan in particular I think, accusing them of... because of their dirty habit of big time saving whilst vigorously exporting to others who couldn't stop consuming, they have now created such a humongous imbalance in the global financial system that these saver nations are now deserving every bit of misery bestowed on them - like collapse in exports and the ensuing crashing of economy due to the large contribution of these exports to the overall economy.
And to top it all, if the consuming nations (read US+UK+friends) were to default on their debt, these saver nations should blame themselves... coz, they are part of the cause of the GFC.
Great argument huh?
Well, I agree firstly with the collapse in exports in these big exporting nations and the ensuing contraction in their respective economy. No argument here.
But accusing them of saving too much and not spending enough? There is a lot of crap there, if not, a very one-eyed argument that could only come from some UK media brain, which typically is very pessimistic and chauvinistic since quite some of them are still living through the Great British Empire withdrawal syndrome as well as the memory of winning the WWII. Naturally the Germans should always be treated with suspicion if not derision... it's the only right thing to do.
Anyway, I got side tracked. I was actually wanting to talk about the "made in China" badge.
From a report not too long ago, it was highlighting the fact that whilst the "West", as usual, it means US+UK are believing the Chinese economy will suffer because of their lack of domestic market and the over dependence on exports, they will not be able to absorb the excess capacity due to the drop of consumption in the West.
This is partially true as reflected in the Chinese economy. But, the report went ahead and pointed out that may be someone should analyse deeper into the Chinese exports because whilst the Chinese is exporting bulk of the export in the made in China badge as in a finished product, many of its key components are made elsewhere. Hence in terms of real percentage of damage, the Chinese did not come off as bad as some of these component makers since the Chinese contribution constituted only a small part (labour mainly)of the overall value of the goods.
A good example the report has given is Ipod (I think) - it is assembled in China as the final product, but the most important and costly component was made elsewhere (Japan, for eg)... etc, hence, it kind of explain why in this world of trades and death to the evil exporters blame game, China doesn't seem to be hurting that much comparing to Japan and Germany.
The report went further to explore the life of such made-in-China goods and surprisingly it observed and concluded that a large number of these goods was actually consumed within China (can't remember the %, but it was something like 40% or 60%...)
That probably explains why China is now the world's largest auto market, I think.