Tuesday, August 14, 2007

Made in China...

Who said making things cheaper, i.e. in China, is better for business? Only a short-sighted person interested in the bottom line would…

China has been cheaply manufacturing many types of goods for many years, but the shine of the low-cost Empire is becoming increasingly tarnished over the past few months. Pet food contamination was only the beginning. Toothpaste contaminated with an antifreeze ingredient, defective tires, tainted medicine, and lead paint on toys appears to only have been the tip of the contamination iceberg.

Now there are massive recalls on these and probably dozens of other products that haven’t made it to the mainstream headlines. The cost of these recalls can be tallied up fairly quickly, but what about the all-important confidence of the consumer? Once a company has lost the confidence of its customer, it is very hard to get them back.

Don’t believe it? Look at the Big Three. When the Japanese imports hit American shores, the call went out that the Japanese had better cars with higher quality at a lower price. That perception is alive and well today thirty-plus years later. It doesn’t matter if the quality has improved according to numerous benchmarks and magazines, the perception is still there.

And it’s bound to get worse. There are massive influxes of cash and investments in Chinese manufacturing from the West, and the potential consumer market there is incredibly huge. Factories are being built at a staggering rate, not only to manufacture products for export to the West but for consumption inside of China itself. It only stands to reason that on this wild-west frontier of business that corners will be cut to gain the advantage of billions of dollars/euros/yuan available to those businesses that drum up lucrative contracts. With Chinese-built cars due to hit the American market within a couple of years, one really needs to wonder if these vehicles won’t be another set of Yugos in the making.

The Chinese government is ill equipped to regulate this burgeoning industry. Lack of experience, corruption, and a rapidly expanding industrial base all contribute to less than stellar quality and contamination concerns. But that is just the beginning of my concerns.

Part of what concerns me is that for all the billions being spent in China, the government there is still Communist. Not only is it Communist, it is backed by a million-man army with nuclear weapons. Billions can be lost should the government decide to nationalize all of the industry that the West has built. The world economy would crash, but the Chinese have isolated themselves from the rest of the world for years, and can do so again at the drop of a hat. But this won’t happen for some time – the Chinese aren’t done yet. No, they will wait until the rest of the world is utterly dependant on their country for goods, then they will slam the door shut.

Inviting industry to build in their country is a great way to build up their infrastructure. What isn’t commonly known is that the Chinese have been quietly buying bonds and securities from countries around the world. They now have so much that if they decided to dump these securities on the market, the economy of the world would crash and burn. Therein is my other concern. I believe the Chinese are waging an economic war, and doing it for the long term goal of dominating the world.

Unfortunately, it appears that the world is headed down this road. It looks like we are all in for a bumpy ride sometime in the near future, and hitting the wall in the long term.

And yes, I am trying to get my blog banned by the Chinese, and I've been successful in that endeavor. 

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