In the midst of a world focused on oil spewing in the Gulf, some of the most important shifts in recent Chinese manufacturing history are taking place.
Although, getting a lot more coverage in the European press (such as The Financial Times), not usually headline news here in the US.
In a normal news world, wage increases of almost 100% and the potential nationalization of portions of privately held factories would be the core topic of discussion. But, there are always distractions, from the important news of historic marine life damage in the Gulf to the latest Lohan stupidities in LA, and much of what is now happening in China has been building for months (if not years).
But that doesn't change the significance to all of us.
Foxconn, the large electronics manufacturer based in China (and the producer of everything from computers to most Apple products) has experienced a spate of suicides and strikes over the past months. As a result, Foxconn has announced wage increases of 66% effective October 1, on top of the 30% increase announced last week.
Perhaps more importantly, Foxconn has announced that it is exploring ways to separate the factory environment from the living environment (and it is a big environment with about 270,000 workers in just one location in Shenzhen across from Hong Kong). One option is to sell the factory housing to the Chinese government and then lease it back.
Workers migrating from one part of China (usually the north) to another part (usually the south) and living in company supplied dorms on the factory site have been the foundation of the production structure ever since the world began to shift production to China.
So, we now face double digit wage increases, the potential for continued strikes as seen at Honda facilities spreading to smaller factories in different areas of the country, as well as the potential involvement of the government in the private factories. Plus, an aging population and an imbalance of men to women thanks to the 30 year old one child policy.
Is the global party that has been fueled by cheap, virtually unregulated labor and the undercurrent of capitalism in China coming to an end? And what does that mean to the West? Does everyone accelerate the movement to countries like India and Vietnam? Is the growing Chinese middle class able to consume enough for China not to care about the long-range export picture?
All very good questions to ponder. And that is exactly what we are going to explore in the upcoming weeks, as well as the adventures of selling (instead of just buying from) to China as we rebirth the focus and content of this blog.
The take-aways: perhaps now is the best time to go buy that new flat screen before the prices go up.
More to follow....
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