Sunday, November 21, 2010

Book Review: Fast Boat to China

What I learned for the first two chapters of “Fast Boat to China”?

What do we know about China? We know
  • China is growing strong with great potential
  • China is the World’s Factory
  • China is consuming a lot world’s resources, and driving up raw material prices such as steel and oil.
Do we know what the Impact of China’s Growth is? We suffer job lost due to outsourcing to China
  • Low-end blue-collared job such as factory worker for Textile, Furniture, Apparels are outsourced to China, causing Factory in other parts to shut down and many low-income group lost their job
  • Low-end white-collared job such as Call Center, Accounting, Back Office Paperwork are shipped to China (and other cheaper part of the world), causing many low-income group lost their job.
  • Middle-class engineers and technicians loose their jobs as well as most High-Tech Electronics and Automobile factories are setup in China.
  • High-end programmer, engineer, scientist and research loose some of their job as more company setup R&D centers in China (including HP, Microsoft, IBM, etc)
  • Expatriate who demands high salary working for multinational in China are slowing being replace with local talent with a fraction of their cost and benefit.
What kinds of job are safe from outsourcing? Lawyers, Doctors, Policeman, Postman, Rubbish Collector, Plumber, Waiter, Maids and etc. That’s given the influx of immigrants doesn’t take away our job as well.

In return, we get cheaper goods from China in exchange for our unemployment and dying economy. And we get cheaper maids and cheaper restaurant food thanks to immigrants.

Why business move to China? Initially china is cheap with abundance of cheap materials and labors, thus it’s cheaper to produce things in China to sell to the rest of the world. Then China grown bigger with a large domestic market and middle class citizens, with more business moving in to sell to the China market. The cost is growing, the labor will “shrink” as the growth of foreign investment outgrown the growth of local labors and talents. Too many companies are fighting to employ the workers and professionals, where not every one of them are qualified with the right skills and correct mentalities. Slowly, it is no longer cheap with abundance of workforce, but the domestic market is growing. Eventually, China will be like United States. Will China still be attractive by then? Probably yes, but in another way.

Most Multinational Corporation spread their operation all over the world, but how many of their workforce is actually in their home country? How much taxes the pay to their home country? Is it a national pride, or there are issue of patriotisms and loyalty in question here? Or it is supposed to be purely business with economic consideration? If the company loose out in competitiveness because they didn’t outsource, it wouldn’t do good to the home country as well.

China will probably grow into an economy superpower, but it might not take away our jobs for long. Then again, other country like India, Vietnam and Indonesia will probably follow China’s footstep. Will our job ever return to our shores?

My Conclusion
Again, we can’t stop the change (impose trade restriction or abolish free trade, which are not a popular policy by today's expectation), but to change oneself (what used to work before might not work now) and adapt with a newer model (we move from agriculture to industrial to high-tech, and continue to evolve). The transition period is unpredictable and tough, but it presence a good opportunity, and things will eventually stabilize (until the next wave of change).

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