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China

China has been a powerhouse of manufacturing for about thirty years now. But the collapse of globalization, poor internal planning, and increased costs are having a major impact on that status. If you have any of your manufacturing in China, you are going to want to get yourself up to speed on the changes that are coming.

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This may be my favorite section of the website. This section is designed to keep tabs on the ever changing world that is manufacturing in china. A lot of people aren’t so up to date on these changes and I feel rather than you being blindsided down the road, that we should have a place here to keep tabs on those changes.

PRC

For the past three decades, the world has been shocked by the unprecedented growth of the Chinese economy. It has been amazing to watch them accomplishing in a matter of decades what it took other countries hundreds of years to accomplish. And with all this back slapping, the giving of congratulations, and the downright groveling some American companies and politicians have been doing to get down on some of that sweet, sweet Chinese green... It appears that some of our experts failed to ask two critically important questions.

Is this growth real?
Is it sustainable?

China Is Different

Of course China is different from the United States, afterall, every country is a little different. But as westerns, we sometimes don't stop to understand HOW different their thinking is. To understand what drives them today, we need to look back at their history.

For thousands of years, the primary objective of whichever government happened to be leading China at the time, was to keep the people busy; keep them working. What the people did, and how financially successful the endeavor was, didn’t really matter all that much. The goal was to simply keep people busy.

Consider the massive flood management undertakings of the Yellow river which over thousands of years has raised the river to well above the ground level.

Or the beautiful, epic, and ultimately ineffective military barrier known as the great wall of China.

Even their staple food crop is staggeringly labor-intensive.

Example after example we can see China embarking on these massive “jobs programs”, and from a western, or from a capitalist point of view, there have been economic failures. But from the perspective of keeping people busy, it has been quite effective.

So, when it comes to modern China, we shouldn’t be at all surprised to see they are doing the same thing over the past thirty years.

For decades we’ve been marveling at the ridiculous prices for goods made in China. I remember working on projects where the tool maker said to me his customer could buy an entire mold from China for less money than it cost him to buy the steel. And we shook our heads and wondered how that was possible.

Well it turns out... it wasn’t possible if you look at it from a western perspective. But if you look at it from the point of view that money doesn’t matter, that keeping people working is the only thing of importance... it makes a little more sense. If it costs $10,000 to make a mold, just charge the customer $3,000, put the rest on credit and we can deal with that problem later.

This is the equivalent of a teenager running around charging everything they want on their daddies credit card. But eventually... that credit card bill comes due, and it must be paid. My friends, that inevitable day of accountability has come... and China now needs to pay its bills.

China's Economic Collapse

Evergrande is one of China’s biggest players in one of China’s largest market sectors. This market makes up approximately a third of China’s entire economy. And now... they have declared bankruptcy. Honestly, nobody should have been surprised by this, they were effectively building entire city’s all at once, and borrowing money at double digit percentage rates to do so. All to build housing that people were buying as speculative Investments. The entire thing was a house of cards, and it was only a matter of time before it collapsed.

Anti Espionage Law

They say you should never swim out to rescue a person who is drowning, because they will do unexpected and dangerous things... even if it means accidentally drowning the person trying to save them.

It appears China is in a similar situation when it comes to capital in the form of foreign business. It seems their new anti Espionage law gives even more control to an already ambiguous set of laws that allows China to access companies’ data and the penalties for such crimes can be life in prison and even death.

Tech Restrictions

China has always been behind the ball when it comes to advanced chip manufacturing and have not been able to produce a microchip better than 90nm themselves without help from the outside world.

Why Are You Still In China?

With all the problems that are currently going on within China, it begs the question, what on earth would you still have anything produced there? If you started reshoring today, you still would not be at the forefront of China’s manufacturing exodus. Possibly you don’t know where to start? And if that’s the case, you are in luck. Step one is to learn everything you can about the problems coming to you and your company if you stay. And step two, if clicking the link just to the left and booking a meeting with us today. Let’s chat, and see what Central can do for you.

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Globalization

For decades we have relied on globalization as the backbone on which we do business. But as that system adjusts to the new reality, we will need to make changes to our business, and how we think about our supply chains. This is not something we can afford to ignore, we will need start adjusting our strategies soon before we are caught off guard.

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