Warm-Up Post Before I Get Down to the Real Stuff
China is an economic basket case that is heading into a decade-long (or longer) depression reminscent of Japan 1990-2009. I've said this here numerous times and been criticized numerous times. Well, Paul Krugman seems to see trouble for China as well. Besides his comments, I also offer this article:
China loses low-cost manufacturing crown to India, Mexico: Study
20 May 2009, 1702 hrs IST, AGENCIES
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SHANGHAI: China has lost its position as the world's lowest-cost components manufacturer to India and Mexico, a study indicated Wednesday, in a
blow for the Asian giant as it fights the financial crisis.
The United States has also significantly closed the gap to the degree that China's total manufacturing costs are now only six percent below those of American factories, the study by AlixPartners business consultants indicated. [good luck China--you're going to need it. Without a cost advantadge, your crappy products aren't going anywhere. Speaking of crap--I wouldn't be buying any couches from China if I were you.]
"Gone are the days when companies could see cost savings of 30 percent or more by making 'no-brainer' manufacturing-footprint and outsourcing decisions, to China in particular," said Stephen Maurer, a managing director at the firm.
The company, which specialises in helping distressed businesses, compiled its Manufacturing-Outsourcing Cost Index by analysing a basket of manufactured components and assembled parts, ranging from small motors to die castings.
It compared the cost of making the items in China, India, Brazil and Mexico versus the US, tracking changes over three years in factors such as labour, overheads, exchange rates, transportation, and raw material costs.
The index showed major shifts in costs over the past six months that pushed China down the rankings and Mexico now on top, the firm said in a statement.
It predicted China's costs would improve in the second half of 2009, as more moderate oil prices and the economic slowdown reduced sea shipping costs, but added the country was unlikely to catch up with India and Mexico this year.
Meanwhile, US plants have become much more competitive, but their costs are still much higher than most of the countries studied, the firm said.