Why are 'things' from China so cheap?

[LaurieAG]

Originally Posted by Michaelangelica

Is China deliberately keeping the exchange rate of their currency low?
Is that why things are so unnaturally cheap?

In the past 8 years or so China has undergone a modernisation of many older factories so that the newer ones require about 25% of the staff as before to produce much more product. The major outsourcing efforts from the USA and other nations around the world drove this trend to its current peak.

As a result of the efficiency gains in certain specific industry niches, allowing their currency to appreciate or depreciate in an uncontrolled manner would cause much undue hardship for many tens of millions of Chinese people.

They are only being responsible global economic citizens (to their own people i.e. what western democracies are theoretically supposed to do), as opposed to those who have sent their local work offshore to increase the profits to their shareholders and themselves.

[Michaelangelica]

Originally Posted by LaurieAG

In the past 8 years or so China has undergone a modernisation
allowing their currency to appreciate or depreciate in an uncontrolled manner would cause much undue hardship for many tens of millions of Chinese people.

as opposed to those who have sent their local work offshore to increase the profits to their shareholders and themselves.

good points LaurieAG
So why does everyone else let their currency rate be determined by the international market (ie "float")?
Do companies have a choice about outsourcing to China; given their only aim in life is to increase returns for shareholders?

A freind was in China and saw, lets say a 'bolt", selling for 10c. He knew the local Hardware store Barn/Chain ( nothing like the great, old fashioned, evertyhing-crammed-in-everywhere, Aldan's caves,. . sigh. . .) sold the bolt for $2. He saw the opportunity for profit; offered the bolt to the Hardware chain for 25c. They rejected his offer, saying they were buying it cheaper themselves!
Now that sounds like profiteering to me.

Re CraigD's comments re aluminium. I don't think that is the case here; but the aluminium factory is bang in the middle of the major coal field and power generating area for the state. (Newcastle/ Hunter valley)The aluminum ore is shipped from Weipa in NT thousands of miles away. The power stations used to be owned by the state now they are privitised (ie owned by Americans- Origin)
I am pretty sure China buys a lot of its aluminum from us. (So we are back to 30c worth of aluminium for my secateurs) When China sneezes (as happened a few weeks ago) Oz mining stocks catch a cold. Things are fast getting to the stage when mining will be the only industry left. Most manufacturing is now off shore. Mitsubishi and Ford struggle on with car factories and Govt. help but that won't last. I am told Mercedes cars are now built in China.

Perhaps the shop just mis-priced my $3 secateurs- I have been thinking I need to go back and buy 6 pairs.
I have seen them in the supermarket for $10.

PS
I am told croquet is a no-holds-barred, devious, vicious game anyhow.
(I always wanted to learn it)

[maikeru]

Originally Posted by Michaelangelica

Is China deliberately keeping the exchange rate of their currency low?
Is that why things are so unnaturally cheap?

Yes, I believe they are. The US has complained numerous times about the undervalued yuan, despite our insatiable appetite for their cheap goods.

Like others here have mentioned, why things are cheap in China is a complex interplay of many things. Having such a large population (and remember that most of China's population is still rural, very poor, and many are uneducated or poorly educated and cannot therefore ask for good pay), they have an almost inexhaustible supply of cheap labor. They have deals with several countries to import materials in huge quantities, such as wood from Indonesia and Brazil (and are fueling deforestation in those countries). They also make commitments and investments in other countries such as Brazil and Iran to help develop infrastructure in return for services + resources. Companies sometimes have agreements with the national and local Communist party officials to help suppress workers' wages and strikes, which maintains production and schedules. Infrastructure, such as roads and factories, in China is often not built and paid for by the Chinese but by foreign investors and developers. Land is often seized illegally or through forced coercion from farmers and other citizens, and then given/sold to developers and investors.

There are more things I could list and many more that I don't know, but it's safe to say that things are really stacked in the favor of China.

I feel a bit sorry for China. The people are lovely, but the government and land not so much now. Too much corruption, too much pollution. And this is a real shame considering China's affinity for the land and scenery in older times. The love of the land that would inspire poetry and paintings.

[jungjedi]

i dont mean to make waves but i just got a nokia 5300 from china.paid 220.coud have got it cheaper from same sorce.but still left wondering how this thechnology could come to me so chea.i mean its a 2 gig mp3-mp4aaq with bluetoooth,and very killer lcd.i could set it to silent and get off to the ringtones in my pocket if you know whot i mean.whats next,a phaser ?

[LaurieAG]

Originally Posted by Michaelangelica

So why does everyone else let their currency rate be determined by the international market (ie "float")?
Do companies have a choice about outsourcing to China; given their only aim in life is to increase returns for shareholders?
....
Perhaps the shop just mis-priced my $3 secateurs- I have been thinking I need to go back and buy 6 pairs.
I have seen them in the supermarket for $10.

The difference is between an unregulated 'free' market and a regulated 'fair' market. Coincidentally, I often wonder where deregulation really ends considering that recently, when business regulations have been deregulated, personal regulations are much more heavily regulated in return. It's a bit like a fairy tale ending really.

'The plea of BeiBionn'

You can have your magic beans Jack, your children are hungry and we need the cow back.
The lack of just terms and equitable or fair pacts, expose all crooked beanstalks to concerted attacks.
Unless obsessive cycles are stopped in their tracks, our towns will again be as flat as tacks.
You have been too trusting Jack, your childrens futures remain black, while current problems compound through lack.
Struggle earnestly against the pack, repudiate rights to depreciatingly retract, as giants fortress lie ripe for sack.
For only fair shares of the golden goose Jack, will save beanstalks and giants from the axe.

Your secateurs could have been a 'loss leader' intended to reduce profits or even make a loss. The difference is made up by increasing the margin on several other items to compensate for the loss.

Cheers.

[Michaelangelica]

Originally Posted by LaurieAG

The difference is between an unregulated 'free' market and a regulated 'fair' market. , your childrens futures remain black, while current problems compound through lack.
Struggle earnestly against the pack, repudiate rights to depreciatingly retract, as giants fortress lie ripe for sack.
For only fair shares of the golden goose Jack, will save beanstalks and giants from the axe.

Your secateurs could have been a 'loss leader' intended to reduce profits or even make a loss. The difference is made up by increasing the margin on several other items to compensate for the loss.

Cheers.

Good points The secateurs are their regular price
I found this in the latest amnesty mag
Found the full press release on their site.
It tells an interesting story.

Perhaps, judging by the feeling on this thread, we would all pay an extra 10% say- for Chinese stuff- if they looked after their people, the planet and addressed GW issues?

China: The human cost of the economic 'miracle'



Press release, 03/01/2007
The millions of migrant labourers who are fuelling China's economic growth are treated as an urban underclass, according to a new report by Amnesty International. Despite recent reforms, they are shut out of the health care system and state education, live in appalling, overcrowded conditions and are routinely exposed to some of the most exploitative working conditions.

"China's so-called economic 'miracle' comes at a terrible human cost -- rural migrants living in the cities experience some of the worst abuse in the work place," said Catherine Baber, Deputy Asia Pacific Director at Amnesty International. "They are forced to work long stretches of overtime, often denied time off even when sick, and labour under hazardous conditions for paltry wages."

"As well as being exploited by employers, migrant families face discriminatory government regulations in almost every area of daily life. They are denied housing benefits and health insurance available to permanent urban residents and their children are often effectively shut out of the state education system."

There are estimated to be between 150-200 million rural workers who have moved to China's cities in search of work and the number is set to grow in the coming decade. In some cities they make up the majority of the population.

Internal migrants are required to register as a temporary residents with local authorities under the hukou (household registration) system. Those who manage to complete the often laborious process still face discrimination in housing, education, health care and employment on the basis of their temporary status. The many who are unable to complete the process are left with no legal status, making them vulnerable to exploitation by police, landlords, employers and local residents.

"The central government has taken some steps to improve the plight of migrant workers, but the biggest issue remains entrenched -- the hukou system continues to discriminate against people on the basis of their social origin," said Catherine Baber. "The government must reform the hukou system and also push local authorities to implement existing laws that are meant to ensure health care, fairer conditions of employment and free primary education."

Managers use a variety of tactics to prevent workers resigning. Internal migrants are typically owed back pay, meaning those who quit their job lose at least 2-3 months wages. Employers often purposefully withhold wages before the lunar new year to ensure workers come back to their jobs after the festive period -- meaning millions of migrants are unable to buy train tickets home for the holidays. Managers often illegally force workers to pay a deposit to prevent them switching jobs. Because of their insecure status under the hukou system, internal migrants are not likely to complain.

Such tactics allow managers to deal with the growing labour shortage without having to raise wages. This helps explain why wages have not risen significantly in response to labour shortages, as one would expect under normal market conditions.

One migrant, 21-year old Ms Zhang, worked in a clothing factory on the outskirts of Beijing. The workers had not been paid for 3 months and they decided to cut their losses and leave. But they were locked into the factory and needed permission slips to leave. Finally one of them stole the key to the gate and they left en masse so the guard couldn't hold them back. Ms Zhang recounted: "At the time, we were really pleased with ourselves... In fact, there were those in our group who had lost four months of wages."

Millions of children of internal migrants are also affected and struggle to get a decent education. In many areas they are effectively shut out of state schools by their parents' lack of local hukou registration, by charges levied exclusively on migrants or by high school fees.

"China has committed to providing free primary education, but despite the efforts of the central government, state schools still charge fees that make primary education unaffordable, particularly to internal migrants," said Catherine Baber. "These millions of children are China's future: the government must allow them an education."

Further information :
Feature: China's growing underclass
China: Internal Migrants: Discrimination and abuse. The human cost of an economic 'miracle'
China: Resource for journalists -- memorandum on 'Re-education through Labour'
01/03/2007

China: The human cost of the economic 'miracle' - news.amnesty - Amnesty International

[Michaelangelica]

Well if they continue to make crappy products like my "Phillips" brand, Made in China, low energy, light that lasted 4 months
China will do more environmental damage than we thought possible.

[Michaelangelica]

I think the Chinese currency is undervalued.
It is 'pegged' by the Chinese government.
It does not "float" on the world market
This makes it cheaper to buy Chinese goods, But imported raw materials are dearer.

If China let her currency float she would loose that amount (%) of her foreign exchange reserves. Which is in the Billions
She seems to be between a rock and a hard place.
Perhaps she needs to let her currency slowly rise in value.
(Or buy O.S. resource companies -which she may be doing in Africa)

I note her CO2 emissions now rival the USA.
Not really bad for a country of some billions Vrs. one of some 280 million

[Michaelangelica]

Sunday 01 July 2007

Listen Now - 01072007 | Download Audio - 01072007
Will Hutton on The Chinese Bubble

China's titanic rise is the biggest news since the Industrial Revolution. Developed nations are in awe. Some, like the United States, are in fear. However, according to writer and long time China-observer Will Hutton Western anxieties are misplaced. Hutton sees China sitting on the edge of a very deep precipice. He cites endemic corruption, environmental depredation, widening inequality, and insufficent job creation as just some of the challenges threatening to bring China undone. Join us for a spirited naysaying of the Chinese revolution, with Will Hutton at a business breakfast in Sydney.
Sunday 01 July 2007

Big Ideas
Sunday 5pm, repeated Saturday 7pm
Big Ideas brings you lectures, conversations, features and special series from Australia and around the world.
http://www.abc.net.au/rn/bigideas/

[Boerseun]

Ironical, too, is that even with China's economy growing like a monkey on 'roids, the Chinese economy must be five to six times that of the US' economy for it to be the same as the US per capita, simply because there's one hell of a lot of people in China!

So, don't let the reports confuse you. For a long time yet, China will be a country of poor people, regardless of it's GDP being bigger than the US.