China has reached the end of its economic boom. What comes next should worry every American business — and the rest of the world.
China has reached the end of its economic boom. What comes next should worry every American business — and the rest of the world.
I don’t directly deal with China, but I do know that it’s pretty much the only place where you can say “I need a factory with 20k people manufacturing a million of these widgets per month,” and it just gets done. There’s obviously all kinds of bad baggage that goes along with that, and yes it’s perhaps ironic that a “communist” country is the go-to place for labor exploitation, but that’s how it is right now.
China may have been guilty of enthusiastic over-investment that got ahead of where their market actually was in areas like real estate. That’s again ironic because that’s exactly one of the weaknesses of market systems.
In the other hand it’s not really ironic because China is actually the apotheosis of state capitalism.
I feel like a lot of people were looking to see China to become the world’s largest economy soon, but it is becoming apparent that China’s economic growth is no longer sustainable.
We also don’t know what a Chinese recession is going to look like. We’re at the collapse of Bear Stearns point in what’s going on in China and it isn’t like China can pump its economy through infrastructure spending.
I know from personal experience that while Chinese factories are great for mass manufacturing, things really start to go out the window once you get into precision engineering. My company put a ban on ordering any parts that need high metal purity (95%+) from China or India because they would just falsify their material test reports constantly.
To be clear, you can at great cost overcome those issues too and maintain a good level of supply chain integrity, however it costs so much doing so only makes sense when manufacturing on a huge scale - tens of millions at least with each item being very valuable. Ie…iPhones.
The vast majority of stuff that people want made in China isn’t nearly that profitable.