Eutrusca
09-02-2006, 19:05
COMMENTARY: Sometimes things are not quite as they appear. Seems the much-ballyhooed "trade deficit" with China is vastly overstated since most of the profit for "made in China" products winds up in the coffers of US corporations. Interesting article.
Some Assembly Needed: China as Asia Factory (http://www.nytimes.com/2006/02/09/business/worldbusiness/09asia.html?th&emc=th)
By DAVID BARBOZA
Published: February 9, 2006
SHENZHEN, China — Hundreds of workers at a sprawling Japanese-owned Hitachi factory here are fashioning plates of glass and aluminum into shiny computer disks, wrapping them in foil. The products are destined for the United States, where they will arrive like billions of other items, labeled "made in China."
Hitachi is among multinational corporations that are putting plants in China because of its cheap labor and highly disciplined factory work forces.
But often these days, "made in China" is mostly made elsewhere — by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks.
Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be. That kind of distortion is likely to appear again on Feb. 10, when the Commerce Department announces the American trade deficit with China. By many estimates, it swelled to a record $200 billion last year.
It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China.
American multinational corporations and other foreign companies, including retailers, are the largely invisible hands behind the factories pumping out these inexpensive goods. And they are reaping the bulk of profits from the trade.
Yasheng Huang, an associate professor at the Sloan School of Management at Massachusetts Institute of Technology, explained: "Basically, in the 1990's, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China. But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."
The real losers, it seems, are mostly low-wage workers elsewhere, like the ones at Hitachi who lost their jobs in Japan, along with workers in other parts of Asia who suffered as employers began relocating plants to China. Blue-collar workers in the United States have also lost out.
Asian exports to the United States have actually slipped over the last 15 years. Factories in Taiwan used to assemble many of the world's computers; now China does. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do. And Japanese plants once manufactured the most popular consumer electronics brands, like Sony, Panasonic and Toshiba; now many of these are shipped from Chinese ports.
In fact, about 60 percent of this country's exports are controlled by foreign companies, according to Chinese customs data. In categories like computer parts and consumer electronics, foreign companies command an even greater share of control over the exports, analysts say.
Foreign expertise has been critical as manufacturing supply chains become increasingly complex, involving countries' each producing components that are then shipped to China for assembly. Such a system can render global trade statistics misleading, and some experts say that a more apt label would be "assembled in China."
"The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that."
Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures.
"In a globalized world, bilateral trade figures are irrelevant," he argued. "The trade balance between the U.S. and China is as irrelevant as the trade balance between New York and Minnesota."
China's supply of cheap labor, coupled with what is widely seen as a deliberately undervalued currency, helped some $465 billion in foreign direct investment flow into the country from 1995 to 2004, making it one of the hottest destinations in the world for foreign capital.
In the electronics industry, relocations to China have soared. A decade ago, Taiwan controlled the computer components market and relied on domestic manufacturing. Today, companies on Taiwan produce 80 percent of computer motherboards, 72 percent of notebook computers and 68 percent of L.C.D. monitors. And most of the assembly takes place in China.
[ This article is two pages long. To read the rest of the article, go here (http://www.nytimes.com/2006/02/09/business/worldbusiness/09asia.html?pagewanted=2&th&emc=th). ]
Some Assembly Needed: China as Asia Factory (http://www.nytimes.com/2006/02/09/business/worldbusiness/09asia.html?th&emc=th)
By DAVID BARBOZA
Published: February 9, 2006
SHENZHEN, China — Hundreds of workers at a sprawling Japanese-owned Hitachi factory here are fashioning plates of glass and aluminum into shiny computer disks, wrapping them in foil. The products are destined for the United States, where they will arrive like billions of other items, labeled "made in China."
Hitachi is among multinational corporations that are putting plants in China because of its cheap labor and highly disciplined factory work forces.
But often these days, "made in China" is mostly made elsewhere — by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks.
Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be. That kind of distortion is likely to appear again on Feb. 10, when the Commerce Department announces the American trade deficit with China. By many estimates, it swelled to a record $200 billion last year.
It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China.
American multinational corporations and other foreign companies, including retailers, are the largely invisible hands behind the factories pumping out these inexpensive goods. And they are reaping the bulk of profits from the trade.
Yasheng Huang, an associate professor at the Sloan School of Management at Massachusetts Institute of Technology, explained: "Basically, in the 1990's, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China. But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."
The real losers, it seems, are mostly low-wage workers elsewhere, like the ones at Hitachi who lost their jobs in Japan, along with workers in other parts of Asia who suffered as employers began relocating plants to China. Blue-collar workers in the United States have also lost out.
Asian exports to the United States have actually slipped over the last 15 years. Factories in Taiwan used to assemble many of the world's computers; now China does. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do. And Japanese plants once manufactured the most popular consumer electronics brands, like Sony, Panasonic and Toshiba; now many of these are shipped from Chinese ports.
In fact, about 60 percent of this country's exports are controlled by foreign companies, according to Chinese customs data. In categories like computer parts and consumer electronics, foreign companies command an even greater share of control over the exports, analysts say.
Foreign expertise has been critical as manufacturing supply chains become increasingly complex, involving countries' each producing components that are then shipped to China for assembly. Such a system can render global trade statistics misleading, and some experts say that a more apt label would be "assembled in China."
"The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that."
Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures.
"In a globalized world, bilateral trade figures are irrelevant," he argued. "The trade balance between the U.S. and China is as irrelevant as the trade balance between New York and Minnesota."
China's supply of cheap labor, coupled with what is widely seen as a deliberately undervalued currency, helped some $465 billion in foreign direct investment flow into the country from 1995 to 2004, making it one of the hottest destinations in the world for foreign capital.
In the electronics industry, relocations to China have soared. A decade ago, Taiwan controlled the computer components market and relied on domestic manufacturing. Today, companies on Taiwan produce 80 percent of computer motherboards, 72 percent of notebook computers and 68 percent of L.C.D. monitors. And most of the assembly takes place in China.
[ This article is two pages long. To read the rest of the article, go here (http://www.nytimes.com/2006/02/09/business/worldbusiness/09asia.html?pagewanted=2&th&emc=th). ]