Chapter 41 Where are the differences between China and the United States?

The first perceived threat was the so-called "China price".Because the wage level in China is very low, you only need to pay 30% to 50% of the labor price you need to pay to do the same work in the United States and Europe in China.In fact, China's low wages are also considered to be a threat to almost all countries in the world, just like Taiwan, China, which was famous for its low wages before, and Mexico now.China has not only the young rural labor force who come to work in the coastal provinces and cities, but also the infrastructure that China built in the 1990s, so that it can easily transport goods to every corner of the world.Cheap labor is a clear advantage of China, and the cost of modern infrastructure is enough to make China comparable to any developed country.

A notable result of China's low price advantage has been a further increase in the trade deficit between the United States and China.The rising U.S. trade deficit ($125 billion in 2003) has led more Americans to believe that China's rise is a direct cause of the loss of U.S. domestic manufacturing jobs.Therefore, the Washington government asked China to change the exchange rate between the dollar and the renminbi.The exchange rate between the U.S. dollar and the renminbi is not free-floating, and the Chinese government decided to peg the renminbi to the U.S. dollar many years ago.With the growth of China's exports of manufactured goods, the United States has been criticizing the RMB's fixed exchange rate system.Many Americans accused China of doing this to obtain a lower valuation of the renminbi against the U.S. dollar to maintain a competitive advantage in price, thereby dumping cheap goods to developed countries.In this case, the demands of the United States are obvious: China must change its exchange rate regime or impose stricter control measures on exports.

In an election year, expectations are often the opposite of reality.One matter has been pushed to the forefront by people, but no action to change the status quo has been implemented.The U.S. Congress rarely passes meaningful legislation until late summer, when it may enact legislation aimed at turning lawmakers against issues that would hurt the presidential election.However, politicians are well aware when they declare their positions that words usually have little value and that what is said in an election can ultimately not be reflected in action.During the 2004 election, criticism of China's impact on American jobs never stopped, and calls for China to change its exchange rate system and implement stricter export control measures never stopped.When the Republican Party is working hard to maintain the dominant position of free trade in the United States, the Democratic Party, like the Republican Party, condemns China's exchange rate system. They accuse China's current exchange rate system of harming the interests of American companies and consumers, and demand that China let the RMB appreciate. Candidates have won the support of many voters.Although their propositions were enthusiastically received by ordinary people, none of the parties actually put them into practice.

In the face of U.S. pressure, Chinese government and business leaders have responded in two ways: On the one hand, they claim that China does have a trade surplus with the U.S. In many countries, China also has a huge trade deficit; on the other hand, the current trade situation between China and the United States is not caused by what and how China produces, but by the needs of American consumers and commodity prices.Unlike the U.S. government, which publicly accuses China of unfair competition and anti-competitive policies, the Chinese government is more accustomed to expressing its dissent in a cautious manner.Of course, the public condemnation from the United States has also caused some troubles for China.When it comes to the more contentious private sector, China sees U.S. public criticism as impolite and arrogant.If the main purpose of the United States is to make the Chinese government reconsider its policy proposition, then issuing public condemnation becomes the last resort of the United States.In fact, the public condemnation of China by the United States is not only aimed at China, but also mainly for the American people.

In the face of US condemnation, China has countered: China's economy is still fragile and not as glamorous as the data show; in terms of per capita level, China is still poor, and the development gap between coastal cities and inland agricultural areas It is still very large; the advantages brought by relatively low labor prices to China are not stable. Once the labor prices rise rapidly or the currency appreciates, China will face severe inflation, lose its international competitiveness, and make the domestic economy deviate from the normal track. This leads to the instability of the domestic social order.In addition, China's banking system is also very fragile. A sudden change in the exchange rate system will greatly reduce the profits of domestic export companies, thereby affecting the recovery of bank debts.The impossibility of returning credit funds is a catastrophic problem for the financial system, and the difficulties it creates are almost insoluble.China also worries that the change in the exchange rate will increase domestic currency speculation and black-market trading for dollars.While a revaluation of the currency itself does not bring about the aforementioned negative effects, the drastic changes in circumstances and possible rumors can create such serious problems.Because currency is an important part of the Great Wall of Finance, it is crucial to the development of the country's economy and social stability, and black market speculation is a discordant factor for the country's financial order.

Whether it is public criticism or private condemnation, the US government rarely looks at issues from China's standpoint, and of course it is difficult for China to look at issues from the US's standpoint.American politicians and critics all believe that China's fixed exchange rate system is the reason for its trade advantage over the United States.In the face of pressure and criticism from the United States, the Chinese government is very clear that the United States will not allow China to become a legitimate leading force in the world.Chinese officials may not understand why Americans always pay so much attention to China. In their view, China is still a poor country, while the United States is the richest country in the world. China and the United States are not on the same level at all. On the other hand, why do Americans always regard China as a threat?

There is no doubt that the China issue has become an important topic in American politics in the election year when it is linked to domestic employment in the United States.Occasionally, people are reminded that China's "threat" to the United States is artificially exaggerated.Clyde Prestowitz of the Economic Strategy Institute said: "Our trade deficit with China is just a transfer of previous deficits with South Korea and Taiwan. Many of the goods that China imports from us today, We stopped production in the 1970s and 1980s." Prestowitz also believes that China's rise may cost the United States some jobs, but for China's rival Asian neighbors and Mexico , the situation is even more unfavorable.However, such comments were quickly overwhelmed by the reality: some greedy entrepreneurs reorganized production across the ocean in pursuit of profits. They closed many factories in the United States, causing thousands of jobs to be lost overseas. .

Another reason for the decline in US manufacturing jobs is that information technology is at work.As the profit growth of enterprises in developed countries slows down, they strive to open up new markets (such as the Chinese market) on the one hand, and apply new technologies to improve labor efficiency on the other hand.Computers, customer management software systems, and faster communication channels enable companies to employ fewer employees; just-in-time production means companies can minimize inventories and assemble and sell parts shipped from all over the world. Dell is taking this mode of operation.If the production costs of components in Mexico and China are lower, these domestic companies will move production overseas.However, outsourcing of production would not be possible without information technology.Because information technology makes it possible for enterprises to coordinate parts manufacturers and product suppliers around the world.Only those complex software and systems can make the global supply network operate efficiently, so that standardized parts produced in multiple countries can be shipped to the United States at the same time.Although the ability of enterprises to create jobs has weakened and the rate of wage growth for employees has decreased, the productivity of enterprises has greatly improved. From the end of 2003 to 2004, the overall efficiency of enterprises increased by 4%.The increase in enterprise income brought about by the application of information technology is reflected in the improvement of production efficiency to a large extent.

The trend to adopt information technology to increase productivity will dilute the political debate.“Traitorous CEOs” in China and the United States are easy targets for attacks by Americans, while the link between American companies’ pursuit of technology and consumers’ expectations for cheap goods has become a secondary concern.China is a more appropriate target for Americans to attack than India.Although India is also robbing American jobs, its pace of globalization is much slower than that of China.The call center in the United States has been closed and moved to India, which is a reflection of the advantages of India as an English-speaking country.But India, as a democracy, has higher barriers to global commerce than socialist China.India has many restrictions on foreign companies engaging in commercial activities in India, especially for retail companies.Moreover, India's poor infrastructure (mainly transportation facilities) has brought great difficulties for multinational companies to establish manufacturing bases in India.Jobs in call centers and software programming are important to America, but the loss of those jobs doesn't really affect U.S. manufacturing employment in the eyes of many Americans.Because America is, after all, an industrialized country that relies on steelworkers and car factory employees, not phone operators who just say "what help do you need?"

The debate over outsourcing has become increasingly muddled by ideology.Some people believe that the employment issue is a complex issue, far from being as simple as "one more job opportunity in China and one in the US".Those who question the unfettered process of free trade certainly don't realize how fast the world is changing.In general, realities are more complex than political slogans and ideologies.Just lost some jobs now, maybe more jobs will be lost overseas in the future.However, Americans also enjoy low-priced goods, and of course those multinational companies benefit more from it.

If anyone has doubts about the reality of chaos, look no further than the "bra trade war" between the US and China.The US Republican Party is a beneficiary of free trade, but only to a certain extent. At the end of 2003, in order to prepare for the next year's general election, President Bush imposed strict tariff protection on imported Chinese bras.The Bush administration said that Chinese manufacturers rely on unfair competitive advantages to harm the interests of American textile workers. Most of these workers are from North Carolina and South Carolina, and they are loyal supporters of the Republican Party.However, the trade protection policy dubbed "boudoir tariff" was implemented under the rhetoric of protecting the interests of American workers.But in the end, in this "bra trade war", almost none of the bra manufacturers in the United States survived. Since 2001, North Carolina's textile industry has lost more than 100,000 jobs.However, this is due to the relocation of the production plant to the central region of the United States.Of course, China is also taking jobs in the US textile industry.The Bush administration's tariff policy could either help him win some votes or make him hate some big companies, such as Wal-Mart and Playtex, which can benefit from China's cheap production costs.The new tariffs make it more expensive for these companies to make bras, costs that cannot be passed on to consumers.From this perspective, the "boudoir tariff" not only failed to protect American jobs, but also failed to help American companies, and the new tariffs also indirectly damaged the interests of Japan and Germany, although the original intention of the US government was not to target them.Global tariffs will be further reduced under previous WTO negotiating commitments.Since 2005, China's textile factories have purchased a large number of machinery and equipment.The plants were built on a judgment that a reduction in tariffs would stimulate demand growth.But the new tariff policy implemented by the Bush administration threatened people's previous judgment of the situation, which led China to suspend equipment imports from Japan and Germany. This unanticipated outcome raised the eyebrows that the integration of China and the United States would reduce the power of the US government.Of course, not just the US government, Sino-US integration will reduce the power of all governments, including China.With the deepening and complexity of economic ties, traditional means of economic control have become a double-edged sword.When companies build new global supply chains, government actions to protect workers' interests may cause damage to workers' interests.The company found that the cost of manufacturing its goods had risen faster than its prices.As an American company, it moved production overseas while keeping sales and marketing in the United States.If the profit continues to decline, the company may lay off employees.Any other company would do the same.As businesses and supply chains go global, government power remains domestic.The way governments see the world is binary: our country, theirs, our products, their products.The perspective of enterprises is completely different from that of governments. In their eyes, national boundaries are downplayed. There is no doubt that many American companies have reaped huge benefits from China's development.The profits of companies that have been operating in China for many years are accelerating, and those companies that have just entered China are also catching up. Their development speed is very fast, which also benefits from the efforts of early entrants.Since KFC entered China in the 1990s, its operating performance has been very good.By 2004, although China's KFC directly-operated stores only accounted for 5% of the total number of Yum!In China, KFC is constantly changing and has huge profits. Its revenue is increasing rapidly at an annual growth rate of more than 25%. New branches are not only blooming everywhere in metropolises like Shanghai, but also expanding rapidly to inland cities in China. Nike has taken Yao Ming and Liu Xiang into consideration in its advertising, with the purpose of increasing its promotional efforts in China.Like KFC, Nike has become a household name in China, and its clothing is considered the "coolest" in a consumer survey.The shoes produced by Nike's production plant were mainly sold in Europe and the United States, but now more of its products are designed to cater to the tastes of Chinese consumers, considering the needs of Chinese consumers from design styles to sizes. In 2004, Nike opened an average of 1.5 new retail stores every day in China, and its annual revenue reached 300 million US dollars.Nike has also turned its marketing channel to the Internet, embedding advertisements in popular video games.In a fast-changing world, capturing the characteristics of urban youth's pursuit of individuality is very promising for Nike to improve sales performance.In addition to the rapid improvement in performance, Nike has also rapidly expanded its market outside the United States and Europe.Nike's founder Phil Knight (Phil Knight) once said to his company managers: "Go and win the big market with 2 billion feet." After years of hard work, there are finally more and more people. of people chose Nike shoes. Few companies understand the particularity of Sino-US relations better than Wal-Mart. This retailer, known for selling discounted goods on a large scale, was once famous in the middle of the United States. shop.Few people can imagine that Wal-Mart's impressive achievements today are achieved by providing people with mid-range goods and services at low prices.When the price of a new DVD player is 200 to 400 US dollars, many low- and middle-income earners will be discouraged.But Walmart can sell it for less than $100, and only Walmart can do that.The mystery is that Wal-Mart has carried out labor transfer, and it produces goods at labor costs with low wages and almost no benefits.In order to sell goods at a low price, Wal-Mart must save costs in the production process, which means that the production plant must be moved to China. In the 1980s, Wal-Mart promised its suppliers in the United States that it would "only buy goods made in the United States."However, in the 1990s, Wal-Mart's strategy changed abruptly when suppliers in developed countries were unable to meet its low-cost requirements.It is no exaggeration to say that without China and without the integration between China and the United States, the success of Wal-Mart is absolutely impossible. It is estimated that in the first few years of the 21st century, about 15% of all goods imported by the United States from China were discounted goods imported by Wal-Mart, and the total value reached 18 billion US dollars in 2004.If Wal-Mart were a country, it would be China's sixth largest export market.Wal-Mart's practice has hurt the interests of many domestic suppliers in the United States, and it has also hurt competitors in the retail industry.In order to improve efficiency as much as possible, Wal-Mart is also actively using information technology for enterprise management, including using advanced inventory management systems to reduce excessive reservations, and focus mainly on real-time transactions. Similar to Nike, Wal-Mart has also formulated a set of business expansion strategies in China, and is committed to becoming a major retailer in mainland China. In the mid-1990s, Walmart opened its first shopping supermarkets in China, including Sam's Club in Shenzhen.All of Wal-Mart's supermarkets in China are joint ventures with Chinese companies.By 2005, Wal-Mart had nearly 60 supermarkets in China.Wal-Mart is not the first western retailer to land in China. France's Carrefour has taken the lead in developing in China, and there is also Tesco, a large British retailer.Wal-Mart also faces competition from Chinese domestic supermarkets, and Wumart has developed rapidly in recent years.In China, Wal-Mart copied its business model in the United States, offering thousands of goods in super-large-scale stores, but the product mix is ​​very different from the United States, such as on the shelves of Chinese supermarkets, the types of food, condiments And the number is far more than that of the United States.Some Wal-Mart supermarkets will also have KFC fast food restaurants, which can not only attract consumers, but also enable people who are not familiar with Wal-Mart to know it through KFC. In the U.S., Wal-Mart sparked a revulsion.People questioned Wal-Mart's cheap products, were displeased with Wal-Mart's disregard for employee rights and benefits, and were disappointed that it didn't source American products.However, in China, the public's attitude towards Wal-Mart is very different from that of the American public.If a Wal-Mart that opened in Chongqing crushed its original competitors, it would be seen as a price advantage rather than cause for complaint.Food at Wal-Mart is viewed as clean and hygienic, with a wide variety to choose from, including frogs, eels and spicy chicken feet.On the opening day of a certain Wal-Mart supermarket, there was a long queue. A total of 120,000 consumers came here to shop on the first day of opening.There are more than 100 large cities in China with a population of over one million, so Wal-Mart regards China as the main target market for future expansion. The expected growth rate in China is much higher than that of the United States and other countries, because in these countries, Wal-Mart’s market The share is close to saturation. Similar to the problems faced by Nike, Wal-Mart is also under pressure from the United States. People demand that Wal-Mart should abide by uniform labor standards when dealing with Chinese suppliers.Nike has been plagued by this problem for years, long before it was caught using child labor in Asia.Nike has always presented itself as an open, progressive company, so it is also more vulnerable to people's attacks.In contrast, Walmart's disregard for industry norms and workers' rights has often gone unnoticed.However, Wal-Mart's practice of purchasing a large number of Chinese products has made it a target of public criticism, because Wal-Mart did not follow labor standards and cost Americans many job opportunities.U.S. suppliers that count Wal-Mart as a major customer have also had trouble competing with their Chinese rivals.Facing pressure from Wal-Mart, the famous coffee producer Brown Coffee has almost suspended all operations in the United States.Other coffee producers have lowered wholesale prices in hopes of being able to match Wal-Mart's low prices for their products.During the 2004 presidential election, when Wal-Mart became a target of causing American unemployment, Wal-Mart promised that its product suppliers in China would strictly abide by labor standards.However, the result is so helpless.When Walmart sanctioned a Chinese factory for extending hours, the factory's head tried to work around the issue by opening a second factory next to the factory that wasn't tied to Walmart, still offering a lower-cost product.Wal-Mart is also powerless in this situation. Of course, Wal-Mart has also opened chain supermarkets in other countries around the world, and the number of Wal-Mart supermarkets opened in Mexico exceeds that in China.However, in terms of outsourcing job opportunities and market potential, China means more to Wal-Mart than Mexico, and Sino-US relations are more important than US-Mexico relations.In fact, the temporary tariffs imposed by the Bush administration and the Chinese government's subsidies to help exports are changing the degree to which companies such as Nike and Wal-Mart can compete in the global market.The global market will downplay the role of the border between China and the United States, because the global market is determined by the supply chains of China and the United States.