If I listen uncritically to these clowns at The Economist I might be forgiven for thinking that the Universe is about to tilt on its axis. Again? Well, I think not. Listen to this video post by The Economist and think about what they say. I acknowledge that there is some truth, and certainly value in what they say, if only by being wrong, but I'll offer the following rebuttal.
There are some problems with these arguments:
1. Guangzhou is expensive - there are still rural China and other countries like India, Pakistan, Bangladesh, Africa.
2. Just land costs can be a big factor for some companies in West
3. Western labour prices are cheap because they have not been used...so unskilled labour is cheaply priced in West compared to the runaway high cost of skilled labour.
4. The productivity upside in emerging markets is greater
5. Automation is not a new benefit - it will always be there.
6. There are strategic reasons why you invest in third world - accessing new growth markets
7. A great many components are still made in China...so don't you want to establish near your component source? If not your market for strategic reasons.
8. They take a case of a Lenovo plant to be built in USA - ignoring the fact that Lenovo will have many plants around the world, and its parts will mostly come from China/Taiwan/Malaysia. They ignore the strategic motivation for US basing for US customer customised assembly. This is not common, and true for high-value, customisable product.
9. The high cost of shipping is reason for localised production and the focus of global growth is towards Asia & emerging markets, not back to uncompetitive, cost-stripping developed countries, which have zero-population growth. If they greatly expand their immigration programs, this will make a difference. My guess though is that these Asian immigrants will buy much of their products from Asia on their annual trips there.
I acknowledge that this trend is occurring. I would however suggest that it will take 20 years rather than 2015 as they suggest. It is in fact in the service sector where this is happening the greatest. Now consider that Asians are increasingly being allowed to come to Western countries on a work visa if they are under 30yo. This is a great opportunity to develop language skills and cultural appreciation. Of course the appeal is lost if you end up speaking your native language in a souvenir shop. Certainly the ready access to global cable is not enough for people to speak English well. But its a big start on their parents. The biggest obstacle for the people in these cultures is values I would suggest....and the internet is transformational. The Philippines is a clear leader in this regard.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
There are some problems with these arguments:
1. Guangzhou is expensive - there are still rural China and other countries like India, Pakistan, Bangladesh, Africa.
2. Just land costs can be a big factor for some companies in West
3. Western labour prices are cheap because they have not been used...so unskilled labour is cheaply priced in West compared to the runaway high cost of skilled labour.
4. The productivity upside in emerging markets is greater
5. Automation is not a new benefit - it will always be there.
6. There are strategic reasons why you invest in third world - accessing new growth markets
7. A great many components are still made in China...so don't you want to establish near your component source? If not your market for strategic reasons.
8. They take a case of a Lenovo plant to be built in USA - ignoring the fact that Lenovo will have many plants around the world, and its parts will mostly come from China/Taiwan/Malaysia. They ignore the strategic motivation for US basing for US customer customised assembly. This is not common, and true for high-value, customisable product.
9. The high cost of shipping is reason for localised production and the focus of global growth is towards Asia & emerging markets, not back to uncompetitive, cost-stripping developed countries, which have zero-population growth. If they greatly expand their immigration programs, this will make a difference. My guess though is that these Asian immigrants will buy much of their products from Asia on their annual trips there.
I acknowledge that this trend is occurring. I would however suggest that it will take 20 years rather than 2015 as they suggest. It is in fact in the service sector where this is happening the greatest. Now consider that Asians are increasingly being allowed to come to Western countries on a work visa if they are under 30yo. This is a great opportunity to develop language skills and cultural appreciation. Of course the appeal is lost if you end up speaking your native language in a souvenir shop. Certainly the ready access to global cable is not enough for people to speak English well. But its a big start on their parents. The biggest obstacle for the people in these cultures is values I would suggest....and the internet is transformational. The Philippines is a clear leader in this regard.
Asian property markets outperforming Japan Foreclosed Guide Philippines Property Guide
Profit from mining with Global Mining Investing eBook
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