There are health and environmental costs to fracking which are not being adequately addressed, and which are unsurprisingly ignored by this article. China was able to get a leg up through dirty coal and oil operations, but there are consequences to this. Some of their cities are today near uninhabitable, some are just unbearably smoggy. We definitely do not want to pat ourselves on the back for an economic boom that scars our country's land and water resources and affects the air water of countless individuals (citizens!). If we're going to build our economy on fracking, it should be heavily regulated. No entity should have the right to pump unknown chemicals into the ground with impunity and without oversight. And even with oversight--BP Horizon and every other avoidable oil disaster of the last 10 years.
U.S. Manufacturing costs are almost as low as China’s
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Re: U.S. Manufacturing costs are almost as low as China’s
#52For some industries the USA is and has for some time been a bit lower cost for manufacturing than China. Labor costs are only part of the equation- you also have to take into account transportation costs, energy costs, costs of obtaining capital, etc. all weighed against political, scheduling, and quality risks. For my own industry (specialty machine vision systems) outsourcing to China is almost not worth the troubl…
You left out what (I would think) is the biggest thing! (For your industry especially). That is IP!
It is worth noting specifically, because the costs of China not being on board with protecting innovation means 1) they create a lot less of it (which is both their loss and ours) 2) the stuff you manufacture there has to be protected by the laws of physics, the software, and access etc, rather than a simple code of laws.
This cost is clearly not insurmountable - everyone manufactures in China. But they have to take precautions as they do so, instead of just relying on local law.
By the way I don't think this is in their interests, and I think they will move away from this model with time. There are no doubt great Chinese inventors and creators who need very little by way of protection before creating amazing things that are temporarily protected all over the world. It is almost just an ancillary benefit that they will also start to respect what others (i.e. the rest of the world) manufacture there.
Re: U.S. Manufacturing costs are almost as low as China’s
#53This article grossly oversimplifies things.
The shares of labor cost, energy cost and transportation cost are differing very much from industry to industry. Also, automate of the production of different products is differing very much. You can not compare for example car factoring with software development or food production.
Of course, you can argue that cheap energy gives an industry an advantage. But what happens here are things that are independent of each other. For example, labor costs in China have risen and it gets more difficult to find cheap and adequate workers.
Also you always should consider the consequences: Will the short-terim-advantage for some (!) industries really outweigh the long-term consequences?
Re: U.S. Manufacturing costs are almost as low as China’s
#54Shenzhen China factory owner here.
The costs are definitely rising in China for English speaking technical labor such as the engineers we need. We compete with companies like Apple and all the other foreign companies rushing to China these days to keep them employed. But we are still talking much lower salaries overall, for example, $30,000 USD/year for a degreed Sr. Electrical design engineer with 20 years experience.
Regarding rents, the Shenzhen central business section rents are expensive now and cost/sqft comparable to anywhere else. However, good industrial space is still far cheaper, for example, I just leased an additional 12,000 sqft high quality assembly space with low ESD floors in a technical park along with 8 dorm rooms to sleep up to 32 people (4 per room - last owner had 8 per room). Lease on this new space cost me $3500 per month. There is also a kitchen ran by the tech park where they serve 3 hot buffet style meals per day for $2/day/worker. I'm not aware of anyplace in USA where you can lease a space like this for $0.29 per square foot nor get a buffet meal for $0.66 cents nor have door rooms for workers. Now, it is competitive to find this space and you need to lease when you find it not wait 1 day, it took us 4 months searching and we lost several spaces waiting 1-2 days, but it exists.
But ultimately what is far cheaper here in China and the main reason I must remain here to make money is for the lower cost of the materials required to actually build the products.
There is a critical mass of suppliers here where you can find half dozen capable suppliers for nearly anything you'd need to buy. For example we do a lot of custom molded plastic parts and many times I can make multiple cavity hard (300K shot life) injection mold tools for plastics for $3K-$5K USD and it would cost 5x or even 10x as much to buy them in USA. No less, bolts, nuts, screws, electronics all vastly cheaper here.
Lastly, as someone else noted, the cost of shipping is much cheaper when you originate your shipping quotes from a Chinese account, especially for air shipping to USA, rates originating from my China company's Fedex account is routinely 50% cheaper than what Fedex quotes in the USA. This really adds up when you need to ship stuff around the world quickly.
Re: U.S. Manufacturing costs are almost as low as China’s
#55The next manufacturing frontier to cross is sub-Saharan Africa. We are starting to see signs of it happening. For example, I just bought myself some great shoes ( https://www.oliberte.com/men/ ).
Since it is the last large severely underdeveloped place with cheap, young capable labor and lots of natural resources, this might actually be manufacturing's final frontier.
Re: U.S. Manufacturing costs are almost as low as China’s
#56Earlier quoted context omitted.
American entrepreneurs are the best thing that has happened to China in centuries. If it weren't for American capital, and the American consumer, China would have developed drastically slower (if at all). China's GDP per capita in 1994 was ~$480. That's ~45 years after the Mao revolution. There was no alternative than to pay them cheap wages to start. If you paid them 'first world' wages, nobody would have set up man…
I just don't understand how anyone could be OK with /anyone/ that takes part in this process. It's not okay for the "200 Chinese billionaires" to be profiting off of abusing others, just as it is not okay for Americans to be giving money to these people. There is a difference between being successful financially and being able to sleep well at night.
It's like you didn't read his comment, there was no alternative. There would not be a factory, period, if they couldn't pay their workers at lower rates than Americans. It would not be financially feasible. It would lose money and not be able to buy raw materials and then close down and everyone would get paid $0. So when people say they are actually helping them by paying them more than $0 they are telling the truth. And by saying that you could never be part of that process, you are basically saying that you would be one to pay them $0, which is more harmful than the people that build factories.
Re: U.S. Manufacturing costs are almost as low as China’s
#57Earlier quoted context omitted.
And you feel pride? Seriously, 3$/h? Assumming that a large junk goes to the shop owner, that's not a lot to make each month.
What are you exactly suggesting everyone do? He could pay them $0/hr by not giving them the jobs. You're not offering any constructive feedback while criticizing from your pedestal of inaction. I assume you used a throwaway because you didn't want to attribute that to your personal identity. Billions of Chinese were lifted from poverty by American globalization, granted at the detriment of American jobs. However it f…
"He could pay them $0/hr by not giving them the jobs."
I've always found that to be the absolute shittiest of rebuttals, given by those who have absolutely no point whatsoever. This person is not "giving" anyone a job; they are not being seeing a group of people and saying, "Hmmm, they look like they could use some work. I will create some and give it to them." No. This person needed some work done, and they were offering work. That's it. The person is not a "job creator"; those things don't exist.
"If you're American you can be proud you helped lift a country from the third world into the second."
And do we get to be proud of the complete and utter skull fucking the Chinese environment has taken as a result of that?
Re: U.S. Manufacturing costs are almost as low as China’s
#58China has an authoritarian government that
* is ruled by a secretive group of old men [1]
* produces pollution that threatens the entire world [2]
* uses the great firewall to attack tech companies in other countries like github [3]
* ignores human rights and free speech [4]
* creates artificial military island near neighboring countries [5]
* supports dictators in Russia and Africa [6]
* and prints up to 282% of GDP [7] in order to buy their way into other countries real estate and companies.
If China gets anymore powerful, the world is doomed. We need to curb commerce with China.
[1] http://www.bbc.co.uk/news/world-asia-pacific-13904443
[2] http://www.japantimes.co.jp/news/2013/02/08/reference/chines...
[3] https://citizenlab.org/2015/04/chinas-great-cannon/
[4] http://www.theguardian.com/news/2014/dec/04/-sp-case-against...
[5] http://www.usnews.com/news/world/articles/2015/06/26/philipp...
[6] http://thediplomat.com/2014/03/china-backs-russia-on-ukraine...
[7] http://www.washingtonpost.com/blogs/wonkblog/wp/2015/02/11/c...
Re: U.S. Manufacturing costs are almost as low as China’s
#59For some industries the USA is and has for some time been a bit lower cost for manufacturing than China. Labor costs are only part of the equation- you also have to take into account transportation costs, energy costs, costs of obtaining capital, etc. all weighed against political, scheduling, and quality risks. For my own industry (specialty machine vision systems) outsourcing to China is almost not worth the troubl…
You left out the biggest cost of all: technology theft. The Chinese government wants its manufacturers to watch for technologies that could be of economic or military value and to pass them on to relevant Chinese organizations for use. When the local Party leader's son starts producing your "specialty machine vision systems" in his factory down the road, are you going to go to the Party-controlled court and sue him?…
You are correct, IP is a bit of a joke in China (oh, the stories I wish I could tell...). You can't rely on the Chinese legal system to protect your IP so you have to take a number of technical precautions to ensure that it is extremely difficult to knock off your product even with inside the factory knowledge. My company has gotten burned about this in the past. Needless to say, this all adds cost to your product.
Re: U.S. Manufacturing costs are almost as low as China’s
#60This has been predicted for a while. This has been said as early as 2010 and possibly even before that by about 2015 costs would equalize. In 2013 there was an article in The Economist on this:
http://www.economist.com/news/special-report/21569570-growin...
Here is a key quote from the article:
"BCG used to argue that companies unwilling to send their manufacturing to lower-cost countries were putting their very future in jeopardy. Now it says that companies will bring manufacturing back to America from China. As soon as 2015, says Hal Sirkin, a consultant at the firm, it will cost about the same to manufacture goods for the American market in certain parts of America as in China in many industries, including computers and electronics, machinery, appliances, electrical equipment and furniture. That calculation takes into account a wide variety of direct costs, including labour, property and transport, as well as indirect ones such as supply-chain risk."
Also worth noting is that the US is often a bigger market for some goods.
But it's also worth noting that German and Japanese manufacturing has been more expensive that US manufacturing for decades and still in some areas Germany and Japan do very well.
It's interesting to see an article that puts fracking up as the key reason. Energy costs are not irrelevant but are also often not a big part of the cost.