'Cheap Made-in-India Products' Strangle China

Chosun Ilbo ^ | 06/19/05 | Choi Yu-shik

[TigerLikesRooster]

http://www.chosun.com/economy/news/200506/200506190265.html

/begin my translation

'Cheap Made-in-India Products' Strangle China

Wal-Mart considering the relocation of its supply base from China to India
Labor cost 30% cheaper, production cost 10% cheaper than China
Wal-Mart to buy 1 billion dollars worth of Indian products.
The beginning of multinational corporations' march out of China?

Choi Yu-shik finder@chosun.com

posted: 2005.06.19 21:02 17'  last modified: 2005.06.20 00:48 19'

Multinationals' march out of China into India is starting?

The world's largest chain store, Wal-Mart in America, is considering to switch from China to India its (main) supply base for textile and clothing,  which is a major blow to Chinese business community. 

Andrew Tsuei, a Vice President in charge of Global Purchasing at Wal-Mart, said in an interview with Indian media last month, "Subcontractors supplying clothing products to Wal-Mart prefer India as its purchasing base, where cost of raw materials is cheaper (than China), and Wal-Mart welcomes such a move." 

The Amount of Wal-Mart's Import from India (unit: one hundred million dollars)

2004 :  3 hundred million 2005:  1 billion (estimate) 2007- 2008: 2.2 billion (annual estimate)

source: Mei-ri-Jing-ji (a Chinese business daily)

China's business daily, Mei-ri-Jing-ji, reported on June 14th edition,  "Wal-Mart decided to boost the purchasing of Indian textile and clothing products from 300 million dollars last year to 1 billion dollars this year, and plans to increase the share of Indian products from the current level of 1% to 5% in a next few years." Wal-Mart's purchase of textile and clothing all over the world amounts to 11 billion dollars annually. Wal-Mart's Chinese headquarter refused to comment on this report.

Wal-Mart is well-known for placing orders to those who can supply them at cheapest price, and, up to now, is a heavy hitter who has  imported 5 billion dollars worth of Chinese textile and clothing annually. However, if Wal-Mart increases the share of Indian products, this would lead to the decrease of Chinese products. This means that the made-in-china products, which has been sweeping the world market with (its advantage of) low price, would now be pushed out by made-in-India products.

Las Vegas Clothing Expo, organized by Franklin Yuan, the president of ASAPSHOW, said in an interview with Chinese media, "The biggest reason Wal-Mart is increasing the purchase of Indian products is because they are cheaper than Chinese by 10%." This is because Indian labor cost is cheaper than China by 30%.

The rise of India is an enormous threat to Chinese textile industry.  Xia De-xiang, the vice president of Yu-er-jie corp., a textile company in Shanghai, said, "For last three years, we have supplied Wal-Mart with 10 million dollars worth of clothing, and it would be a big blow if we lose (Wal-Mart's) orders." 

In particular, they fear that, if yuan(Chinese currency) is appreciated, it would increase the price of Chinese products further, resulting in further switch of suppliers to India.  

Because of this, the rising number of Chinese companies are giving up direct competition against India, and resort to subcontracting to Indians. Zuo Xue-jin, deputy Chief of Shanghai Academy of Social Sciences commented, "Right now, China is the world's factory, but U.S. can relocate its production facilities to India at any time. China should get out of labor-intensive industries, and develop more technology-intensive industries."

/end my translation

[TigerLikesRooster]

Well, if Wal-Mart turns, it is a big news.

[TigerLikesRooster]

Ping!

[ruiner]

"For last three years, we have supplied Wal-Mart with 10 million dollars worth of clothing, and it would be a big blow if we lose (Wal-Mart's) orders."

I was about to say that this didn't sound like a lot, but when you pay people $4 a year it probably is.

[ken5050]

NEWS FLASH: Beijing announces it has retargeted an ICBM to take out Benton, Arkansas..

[NZerFromHK]

Interesting news. BTW it seems you speak Korean. Just wondering if you also speak Chinese as well?

[Sacajaweau]

The best long johns I ever purchased were made in Pakistan. The cotton was awesome and they were LONG. I purchased them in a dollar store for about $3.

[finnman69]

I recently talked at a party to the CEO of a major US manufacturer of hydraulic fittings. They have recently agreed to an Indian manufacturing deal to serve their Asian market because the Indians have gotten their act together with quality control and are able to machine industrial parts to Western Standards.

[Zeppelin]

While I the trade deficit sucks and the clothing will be cheap either way, not to mention my feelings about Wal-Mart (love it and hate it! =P) I would much rather support India's economy than China's.

[BipolarBob]

NEWS FLASH: Beijing announces it has retargeted an ICBM to take out Benton, Arkansas..

Benton is quite a bit South of the HQ of WallyWorld. Try Bentonville.

[ken5050]

Thank you for sharing that with us...(g)

[ken5050]

Oops!..my bad....mea culpa....thanks for the correction..

[reagan_fanatic]

Well, if this is true, it certainly is good news.

After all, we are less likely to have our cities targeted by Indian ICBMs than by Chinese.

[Zeppelin]

****I recently talked at a party to the CEO of a major US manufacturer of hydraulic fittings. They have recently agreed to an Indian manufacturing deal to serve their Asian market because the Indians have gotten their act together with quality control and are able to machine industrial parts to Western Standards.****

One thing I wish America would get back into is the machine-tool industry. We used to have quality machine-tool production. Now, none. Even Germany is down to one or two major manufacturers, I believe. (If anyone has any more info on this, please share!)

[kittymyrib]

How will all the Chinese being smuggled into the US in the container ships be able to get here if India takes over the trade? I guess we'll be seeing a lot more Indians now....

[in hoc signo vinces]

Best way to hurt China is to send dollars elsewhere...seems to be a good start. I like the Indians...they're good people.

[NZerFromHK]

I can confidently say that mainland Chinese manufacturers have absolutely no idea of what quality control means. It is only a matter of time before the so-called world factory implodes in smokes.

[Alberta's Child]

You can't make this sh!t up, can you?

There was a great article in a recent issue of the Journal of Commerce comparing the U.S. "problem" with imports from China today with the "problem" of imports from Japan in recent decades.

One of the critical points that was made in this article was that China's current boom isn't likely to be nearly as strong in the long term as Japan's was, mainly because Chinese-made products don't have any real "identity" at all and can be made just as easily anywhere else in the world.

It never occurred to me until I read this article, but some the defining characteristics of Japanese-made products over the years have been the brand names of these products -- Sony electronics, Toyota automobiles, Kommatsu machinery, etc. Chinese-made products don't have any brand names, mainly because Chinese factories are not part of large Chinese companies that have the corporate infrastructure in place to manufacture, market, and sell products. Chinese factories are sources of cheap labor, and nothing more -- which is why they can only produce things under someone else's brand name. When a cheaper source of labor is found, they're basically out of business.

[TigerLikesRooster]

Re #17

It will take a while for them to go up to the level where they can field their own brands. Their problem is that communist party power structure is getting in the way.

[Vicomte13]

It was bound to happen.

The problem with a race to the bottom in pricing and free market trade is that the bottom is starvation wages or a slave labor camp.

India is cheaper than China, so the work is not done in India. Probably West Africa is even cheaper than India, so that will be the next shift, if any political order can be brought into the place.

Economies that are built on providing the cheapest end of the economy cheaply will create a large class of impoverished proletarians and a small class of super-rich elites.

But there isn't anything to be done about this, really, other than endure it. Time was when America fulfilled this role vis-a-vis Europe. The difference between the past and now is that then countries like the US got a good 50-100 year run to retool and join the ranks of the sophisticated. China will get maybe 10 years in the role of cheap provider, and then will be surpassed. And the problem THEN is fairly obvious. Deracinate peasants by the tens of millions and provide them factory jobs and a slight increase in perceived standard of living (because they have more liquid money): they move to the new urban slums and work in the factories. Now make the factories obsolete because cheaper suppliers are found elsewhere. The peasants can't go back to the land, and the jobs they went to the city to get are pinched off.

The solution, of course, is to do what powered the US growth, and turn China into an engine for its own INTERNAL growth. In other words, cause the Chinese to be their own consumer society. But the catch there is that to do that, the Chinese have to be more free to acquire more wealth. In other words, the Communist ideal of central control must give way. But the Communists will kill rather than relinquish absolute control. That is the final bottom line. In China, the Communists starved 10 million people to death to maintain absolute control. And if push comes to shove, they will kill whoever, wherever, in whatever numbers again in order to maintain absolute control. China has the people and perhaps the talent, but it is permanently limited to second place status for as long as there is a Communist monopoly on all power and ultimate decision taking.
To put it bluntly, Communists are not very intelligent. Real business people and scientists are, and a system must let the business people and scientists choose their leaders. Any system that ultimately has relatively stupid political people having the final say over business and scientific people, as opposed to the other way around, dooms itself to second place status.

Of course nobody who actually IS a communist or a royalist and who is actually IN command will ever acknowledge that it is the very fact of his holding final power and authority that makes his country backwards. That is why, unfortunately, that class of people never voluntarily surrenders power. They always have to be killed. Powerful fools never realize that they are fools and need to relinquish power. And if they are powerful enough, which is most often the case, the fools preserve their grip...and the country as a whole continues to be second or third to countries that are run by more intelligent people.

If the Chinese ever just killed off their Communists, or drove them from power (given the latent violence of Communists, the Chinese will probably have to kill them - they will never voluntarily cede power), China would be in danger of becoming the first world power. Fortunately for America, and for India, the Chinese have no intention of doing that, and the Communists will never, ever, ever, relinquish their grip on China. Which means China will be surpassed by India. It's the fault of the Communists, and of the Chinese for tolerating the Communists.

Unfortunately nobody ever believes these things, so it will just have to be the long march of history that demonstrates it.

[Blood of Tyrants]

I purchased them in a dollar store for about $3.

Sounds like SOMEBODY has forgotten the concept of a "dollar" store;^)