Posted on 04/21/2002 1:36:42 PM PDT by maui_hawaii
IN recent decades, Japanese companies invested to make China the "factory to the world." In recent months, Japan's blue-chip manufacturers announced investments to make China the "design laboratory to the world."
In a cascade of announcements this spring, blue-chip Japanese manufacturing companies said they were planning research and development units in China. Spurring the moves are the low wages of Chinese engineers, a growing Chinese market for computer chips and the hope that China's entry into the World Trade Organization (news - web sites) will bring protection for patents.
The crumbling of an informal wall that long kept assembly in China and research here may spell the end of Japan's last great competitive advantage over its low-wage neighbor. And it is yet another step in China's rise, one that means both new opportunities and wrenching change for Japan, which has lately been coasting on wealth built up in earlier, high-growth decades.
Today's young Japanese have grown up in affluence, taking for granted high wages and their nation's status as the world's second-largest economy. But older Japanese returning from visiting Chinese factories and laboratories report that the hard-working, self-sacrificing Chinese workers remind them of the Japanese workers of the 1960's.
As more and more Japanese manufacturing migrates to China, the research and development activity is gradually following, to be close to production.
"China is quickly becoming a country of low wage and high tech," Yotaro Kobayashi, chairman of Fuji Xerox, warned recently, echoing the spreading insecurities here. "They are going to prove to be extremely competitive with Japanese companies."
China, with an economy only one-quarter the size of Japan's, has a long way to go. But the thousands of computer engineers graduating annually from Chinese universities are enough to keep wages at one-third the level in Japan, a country facing a shortage of engineers. With the number of 18-year-olds decreasing, colleges across Japan are closing because of a shortage of students.
Many of the biggest recent investments involve some of Japan's biggest technology names. This month, the Matsushita Electric Industrial Company opened a research and development laboratory in Suzhou, China, for household appliances. By 2005, this lab and a Matsushita cellphone lab that opened in Beijing last year will employ 1,750 Chinese engineers.
Last month, the Nomura Research Institute, a leading Japanese systems integrator, began outsourcing software projects to China in an effort that will employ 1,000 Chinese software engineers by 2005. The Toshiba Corporation is planning a tenfold increase in the number of engineers at its new chip development center in Shanghai, to 1,000 by 2004.
"We intend to enlarge the R&D function in China," Yukio Shohtoku, managing director of Matsushita Electric, said the day after the lab opened. The complex, in Jiangsu province, 200 miles northwest of Shanghai, will concentrate on developing air-conditioners, lights, refrigerators and washing machines. His company, he added, does "as much software development outside Japan as possible" because it does not have enough engineers and the cost of engineering is high in Japan.
JAPANESE companies are not pioneers in China. By the end of 2000, 29 multinationals, including Lucent Technologies, Microsoft and I.B.M. of the United States, Alcatel of France and Nokia (news - web sites) of Finland, had opened research and development units in China.
Typical of Japan's investment frenzy this spring, Yomiuri, a daily newspaper in Tokyo, recently ran a banner headline, "Toshiba Plans I.T. Plant in China," over an article that cited company sources as saying the electronics concern planned to spend hundreds of millions of dollars to build a huge information technology production and research complex outside Shanghai. A Toshiba spokesman, Hiroyuki Izuo, immediately denied the report. But given the wealth of detail and Japan's tradition of news leaks, many business analysts here believe that Toshiba is preparing a major project.
Japan Inc.'s new scramble to show individual competitiveness looks a lot like Japan's old herd instinct. Hitachi, Sony, Pioneer, Fujitsu and NEC are just some of the other blue-chip companies that have announced plans recently for research and development units in China.
Two weeks after the Mitsubishi Electric Corporation opened an elevator research unit in Shanghai in February, a major rival, the Toshiba Elevator and Building Systems Corporation, opened a research unit, also in Shanghai. And two weeks after plans were announced for the Honda Motorcycle R&D China Company in January, the Yamaha Motor Company announced that it would open a research and development unit in or near Shanghai in 2003.
About 80 percent of the 11 million motorcycles made in China last year were copycats of Japanese models, according to the Japan Automobile Manufacturers Association. With China now in the World Trade Organization, Japanese manufacturers hope that it will crack down on sales of "Yamehas" and "Suzakis."
Much of the new Japanese push into China is in semiconductor design and production, long an area of Japanese strength. The heavy investment this year comes after the worst year by far for the global chip market, but a year in which chip demand in China grew about 30 percent. It is expected to grow another 30 percent there this year.
Fueling this chip demand, China is now the world's largest market for cellphones, and by 2006 is expected to surpass Japan as the No. 2 market for PC's, after the United States. In 30 years, China's population is expected to grow to 13 times that of Japan , from 10 times greater today.
Chinese chip demand is expected to quadruple by 2010, to a $48 billion market, Richard R. Chang, president of the Semiconductor Manufacturing International Corporation, said in a speech here. His company, 38 percent owned by Royal Philips Electronics, the Dutch giant, is part of a series of Chinese chip makers whose executives have visited here in recent weeks to drum up investment.
A surge is also expected in the number of high-tech workers. At an information technology conference here last month, Liu Jiren, chairman of the Neusoft Group, China's largest software company, told Japanese investors that in five years Chinese universities "will produce 5 to 10 times as many engineers as now."
Over all, Japan will be short 300,000 high-technology workers within three years, a Japanese government study warned recently. Despite this shortage, hundreds of Japanese managers and engineers, many forced into early retirement, now work in China, usually for lower pay.
The flow of investment, both human and financial, is changing the nature of China's exports to Japan. Ever since Japan and China established diplomatic ties in 1972, the two largest Asian economies were seen as complementary.
"There is a clear division of labor between the two countries, with China specializing in labor-intensive products and processes, while Japan concentrates in high-tech products," C. H. Kwan, a senior fellow at the Japanese government's Research Institute of Economy Trade and Industry, wrote in a report six months ago. "China's exports look like Japan's imports and vice versa."
IN this relationship, China has sold goods like towels, coal and spring onions to Japan, and Japan has sold laptops, digital cameras and DVD players to China. Now China produces and exports all these goods. The high-technology portion of China's exports has more than tripled, to 18.5 percent last year from 5 percent in 1985. But the goods produced by Japanese companies have largely been designed in Japan.
The Japanese have long prided themselves on quality production, relegating Chinese-made goods to discount shops. Now, Japanese manufacturers and consumers say they do not see much qualitative difference between Made in Japan and Made in China.
In a recent survey of 81 Japanese companies operating in China, 62 percent of managers said they saw no difference in the quality of products made in Japan from those made in China. Fifteen percent said the Chinese products were of better quality, according to the poll, which was commissioned by The Nikkei Business Daily, Japan's leading business newspaper, and Japan Management Association Consultants, a private industry group.
These tectonic shifts are rattling the increasingly insecure Japanese. In the 1990's, China's economy grew seven times as fast as Japan's. Such statistics help populist politicians fan the flames as they play on Japanese fears of this emerging and ambitious economic giant next door.
Last year, Japan reduced its foreign aid to China by 25 percent, to $1.2 billion, the biggest cut since aid started in 1979. The cut was not big enough for Shintaro Ishihara, Tokyo's populist governor, who warned voters last month that Japan "has been providing H-bomb-producing China with hundreds of billions of yen every year from your tax money."
According to the Kyodo News agency, Ichiro Ozawa, a conservative opposition leader, warned recently that if China "gets too inflated, Japanese people will get hysterical."
"It would be so easy for us to produce nuclear warheads," he continued.
But with Japan rivaling the United States as China's biggest economic partner, such hostile talk has prompted a series of "China is not a threat" statements.
"The growth of the Chinese economy will not be a threat for Japan," Li Peng, chairman of China's Parliament, told Japanese investors in Japan this month in one such sally. "The size of the Chinese economy is still small compared with that of Japan."
Full economic cooperation with China will continue, Japan's prime minister, Junichiro Koizumi, vowed this month in a speech at an Asian economic conference in China.
"Some see the economic development of China as a threat," Mr. Koizumi said. "I do not. I believe that its dynamic economic development presents challenges as well as opportunities for Japan.
"I see the advancement of Japan-China economic relations not as a hollowing out of Japanese industry but as an opportunity to nurture new industries in Japan and to develop their activities in the Chinese market," added the prime minister, an advocate of free-market changes at home.
In an exercise in raising morale, Mr. Koizumi recently visited two Japanese high-technology companies in Tokyo and said: "I feel Japan's potential is high. Japanese people should be more confident."
Many business people in Japan think that China's growth will provide jobs for the Japanese in new ways. For example, a consortium of companies in the Japan Railway group is talking with China about selling technology and materials to build a Japanese-style "shinkansen" bullet-train system in China.
But looking 25 years ahead, when China's economy is expected to surpass Japan's, some Japanese say they will have to adjust to playing a secondary role to their huge neighbor.
"Over the last 4,000 years of history, Japan has been a peripheral country to China, with the exception of this one last century," said Kenichi Ohmae, author of "China Impact," published in Japan this month. "In the future, Japan will be to China what Canada is to the United States, what Austria is to Germany, what Ireland is to Britain."
DESPITE the move of higher and higher technology manufacturing and research to China, for the near term at least Japan will retain an edge in animation, video games and the most advanced consumer electronics, Mr. Ohmae predicted. The Nintendo (news - web sites) Company, for instance, produces 70 percent of its GameBoy Advance units in China and plans to start producing GameCube video-game consoles there this summer. But like most Japanese multinationals, Nintendo keeps most of its research and design in Japan.
Not content to write about China's high-technology boom, Mr. Ohmae, former chairman in Japan of McKinsey & Company, the consulting firm, is investing in back-room data processing and telephone information call centers in Dalien, China. Both operations take advantage of the linguistic links of China and Japan and new fiber optic telephone and high-speed data connections. "Half a million Japanese-speaking Chinese live in northeastern China," Mr. Ohmae said, referring to an area with long investment ties to Japan. "The costs are one-tenth that of Japan.
"There is no border," he added, spinning a future of ever closer economic integration. "Part of the business goes to China. Part remains in Japan. I don't see a clear, industry-by-industry separation of China and Japan."
If my numbers are wrong... then what should they be?
check out the comments also...
My point was that Republics are born in violence and grow in fits and starts. Those military dictatorships are a good example. I've been researching after my talks from other threads. I can't find a peaceful transition to democracy. I'm looking at Canada now.
...Localization and separatism surely are opposing forces to globalization, but I think in the end globalization will win out because ultimately capitalism can't be stopped...
Personally I think the globalization will stop short of one world government. It will most likely be regional governments with a unified world economic market. Nations will either be independent states within the regions or semi-autonomous territories within a state, like Nunavut in Canada.
-----
China has issued 511 billion yuan in special treasury bonds over the past four years which have added between 1.5 and two percentage points to economic growth in each of those four years.
---
The real question is, the other %... whatever it really was... where did the funds for that come from?
Let me tell you...
a) CCP industries who profit from trade or whatever...the collective is the money pot for building cel phone infrastructures and internet backbones... b) tax revenues...
The purchasing of big ticket tech items, whether they are cel phone infrastructures by Motorola, or internet whatever.... are built in this way...
Everyone conceded that this is going to happen already...
Motorola got up to about 15% of its revenues from China at one point...
But after saturation occurs, then what?
The cel 'boom' in China is trailing off... or will be within the next few years...
Hence the start of the internet backbone era...
1) Do you know of any information on U.S. % of world GDP both in terms of PPP and Exchange rates. I would love more info. on this, web links or even a book.
2) Even better yet, do you have any info. on the HISTORY of U.S. % of world GDP in terms of PPP and exchange rates?
3) Which is more relevant, PPP or exchange rates?
If China holds together, it will be a threat to the US in the sense that the US will no longer be the sole power in the West Pacific. China will not be able to take the place of the US as a global power. That is determined by geography. The US is protected by two oceans and two weak semi-friendly countries on its borders. The US is a sea power and by extension, an air power. Examples of this are Great Britain and to some extent Spain.
China on the other hand is a land power. It must protect the local seas but also contend with a long land border with large hostile peoples. It has had many small wars and skirmishes with India and Russia and must be wary of the Turks in central Asia. This requires China to maintain a large army and diverts attention and resources. Other examples of this are France and Germany.
Geography. The United States is blessed in position and resources. If China grows in the West Pacific, we can survive. The US can shift focus to the Americas and Africa. Those areas still have much potential for growth.
A unified market can be a good thing and a bad thing. The unification of Europe is producing a common market for US goods but I think it is more of a benefit to Europe than the US. The Europeans are starting to flex their muscles and their main target appears to be the US. I believe they will attmept to shape us into their socialist image just as we have long tried to shape the world to ours. European corporations will also have enough muscle to beat US corporations all over the world. It is already happenning in East Europe.
I don't consider it a peaceful transition yet. There still have a great potential to drop into civil war and dictatorship. It happenned to England, Spain, France, Italy, and the US before they finally settled.
Let me start with this:
First get the facts, then you can distort 'em as much as you want
--Mark Twain
There are three kinds of lies: lies, damn lies, and statistics
--Benjamin Disraeli
If you ask two economists the same question, you're bound to get at least three different answers.
3) Which figure is more relevant depends on what you are looking at and what your goal is. No matter what you do, all you will have is a rough guess. A $10,000 salary in Hannibal Missouri and New York City are two different animals because of purchasing power, hence the index. When you throw in exchange rates, you are in for a headache. You can just use the raw number or go for formulas that determine the effect of policies on the currency. Just be clear which numbers you are using when you present. You can see what happenned in this thread because I was using one method and bushrocks was using another. Confusion.
2) For historical numbers I start with my annual Britannica set, an almanac, and an atlas. From there I go to the internet and cross check my facts as much as possible.
1) According to Britannica, the US GNP for 1999 was 8,879,500,000,000 out of 29,278,809,000,000 or 30.33%
I use Google.com for the vast majority of my searches. Try many many different combinations of key words.
Here is the official government site http://www.bea.gov/
I found this http://www.bea.doc.gov/bea/dn/gdplev.xls
And this http://www.hartford-hwp.com/archives/45/016.html
Most of the 'income' to the US firms is from the PRC rather than the citizens. Businesses are chomping at the bit to sell their stuff to the Chinese when in reallity, they are sill not selling anything to them. They are, however, helping the PRC to obtain high technology, dual-use tech, and a nice deficit:
China sees record 2002 budget deficit
Honestly, I don't believe the Chinese economy will implode within the next few years. However, it is not as stable as most people think. The reason observers are concerned about an economic implosion is they fear the reaction of the CCP/PRC. The CCP has consistently used nationalism (ie the world hates us so the CCP is the only thing keeping you citizens safe) to maintain control. If the CCP has to use a war (such as we are under attack by X country, therefore unrest must stop and all citizens are called to defend the motherland) to keep folks in line it may well do so. See the article below for some background.
China's Hunger: The Consequences of a Rising Demand for Food and Energy: If order broke down, the Chinese would not be the only people to suffer. Civil unrest in the PRC would disrupt trade relationships, send refugees flowing across borders, and force outside powers to consider intervention. If different countries chose to intervene on different sides, China's struggle could lead to major war. In a less apocalyptic but still grim scenario, China's government might try to ward off its demise by attacking adjacent countries.
Finally, I know many countries have used low-wage jobs but have you ever heard of a laogai? If not, you might want to do some research on them.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.