Here is a comment from a reader to a post yesterday:
If you are successful in producing something, China will surely be successful in undercutting you - Chris
There is nothing to support such a statement making any sense. There are countless successful brands that have never been undercut by China, successfully or otherwise. And if the world worked that way, why would it matter?
Volkswagen, Apple, Bollinger, my books, almost nothing, really has ever been attempted at undercutting. There are countless times where successful manufacturers build factories in China to produce goods for sale in USA. But that is not China undercutting USA, that is USA undercutting USA.
There is the small issue of, if the Chinese were to undercut, to whom would they sell the items? One does need customers. Only someone who has never been in business can imagine they would be undercut by China. What matters in business is your relationship with your customers. Should your customers desire your products at a lower price, then you of course would be the one who undercut yourself. This "China as the bad guy" stuff only serves to help that bad guys in our govt and industry who got us into this mess in the first place.
The reason behind the undercutting is starting with President Johnson, and excited under Nixon and all presidents forward, was inflating currency to pay for war and empire eventually brought USA dollars back home, where they might upset the economy. When the Vietnam war ended, the dollars came back, so US Industry was directed to get that money back overseas, by buying factories, and building them.
Big govt and big biz worked hand in hand to control inflation by overseas "investment" and so draining our productive capacity. The unemployed were put on welfare, outright checks or govt jobs, so the process was relatively painless.
As China emerged it saw and opportunity to play with the USA, take the offer, produce for USA. And get paid in funny money. (China uses USA dollar payments to buy T-bills.) The idea from our industrialists was USA was trapping China by paying China in worthless paper. We got real goods, they had to be nice to us, or we'd default on our bonds.
I never thought that could be quite right, because the Chinese are not stupid, in fact, it seems they field a better first string than we do. China made things for USA, and got what they really wanted, our technology. Mission accomplished.
Just as USA can buy things overseas to cool off the money supply, so can China use USA financial instruments to pay for things, around the world. As far as I know I am the only person who has spotted this likelihood: China no longer has all those trillions... China "spent them" buying friends by making infrastructure world wide, infrastructure that supports China trade. China could care less if we default in that case, it would not cost them a dime.
There is almost nothing we buy from overseas that we cannot make ourselves. Almost all importing, as well as exporting, is a reaction to stupid government policy. We should never outlaw import or export, we should just get rid of the stupid government policies.
Wednesday, August 3, 2011
Conditioning On China
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3 comments:
"China will surely be successful in undercutting you" — what nonsense. As though China was a thief in an alleyway ready to stab you in the back.
China is not a person, it is a society of individuals with real lives: jobs, families, hobbies and passions. It's a society just like any other.
You can't talk about it like it were a person.
This anti-China brainwashing comes from the US state department of propaganda. The US Ministry of Truth, if you will.
It is about US politicians pandering to the lowest common denominator ... feeding the nationalistic prejudices of the American masses.
I have been doing business with China for years. Lived there and married a Chinese woman. I love working with these people; they understand business better than most.
And the idea they will undercut you is nonsense. The Chinese suppliers need you desperately, because you are the person who will tell them what to produce which will actually sell. They don't have any idea what people want to buy.
And as the market's preferences are always changing, they will always need you to give them updates, instruction and guidance on how to produce goods that are attractive to the consumer.
They can't do it without you.
-- Pax
I posted my comment in jest of this:
"...But this will be second rate products going to second rate customers. You lose nothing, it is not your product, it is not your customers."
I agree with your views of our gov. trade policies, but your statement above is painting a black and white picture.
-Chris
O dear, I thought it was rather nuanced. What I would like to paint in black and white is marketing vs monopoly. Monopoly (intellectual property rights) means other people are forced to pay still other people to prosecute people you do not know selling things you did not make to people willing to buy.
The black and white part is if you are not selling what you made, why should you be compensated? To say because we have laws is circular reasoning. What is the valid rationale for a system of IPR?
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