This article was written on Aug. 3, 2020. As you read this, a world calamity in China may have occurred or soon will.
It has been known for several months that south China river basins – most notably those in any way related or connected to Three Gorges Dam – are near catastrophic failure. The affected areas are the heartland of the industrial and agricultural economy of the nation. Between 400 and 600 million people, up to twice the entire U.S. population, reside in this area. The Chinese government has raised alerts, but the world has not been advised of the existence or extent of dam(s) failing conditions due to poor original designs. On July 27, dammed waters exceeded 50 feet above maximum flood level even while 60,000 cubic meters per second of excess waters (maximum possible) were continuously released. Structural foundations have already shifted, so problems ultimately will happen and be catastrophic.
This is background information for the real purpose of this column, which is to urge U.S. manufacturing to move from and/or adjust product sourcing from China as soon and as diligently as feasible. Here’s why. Readers are certainly aware that the U.S. is China’s single largest export market, and China is the U.S.’s third largest export market. Readers also know that Chinese government and industry have no respect for intellectual-property ownership rights and are totally corrupt in adhering to protocol. Furthermore, pending and existing trade barriers cause great instability in business planning. Readers certainly know enough to avoid “being killed by an enemy” or “being hung out to dry.” Never turn your back on an enemy or expect them to be your best buddy.
Many nations have urged industries to reduce their reliance on China, but industry is reluctant to leave efficient, low-cost suppliers to move to other countries, including their own. This is a formula for failure in the event of disaster (see above) or real political conflict. The American Chamber of Commerce in south China stated in early July that it doesn’t “know of any company right now that is moving ahead with any plans to move.” And Chinese industry produces or assembles most of the world’s consumer electronics, medical equipment and industrial goods.
“China offers an unparalleled supply chain for any industry,” according to various knowledgeable analysts. All of this is true until that natural or politically created disaster happens – when not paying attention wreaks an unimaginable toll. Companies tied to China by the appeal of its 1.3 billion customer base are undoubtedly headed for more than a surprise. Global companies will be left vulnerable in the event of a disaster or political conflict.
The U.S. and other World Trade Organization members have long criticized China’s domestic steel subsidies, which haunt American steelmakers. Domestic metal-making industry job losses at the end of last year were significant, but the Chinese government injects massive subsidies into all manufacturing operations to “stack the deck.” In terms of cost-of-labor inputs in industrial sectors, China’s labor costs are $2.30 an hour compared to the next nine countries, which averaged about $26 per hour.
Being straightforward, China eats America’s lunch and everybody else’s every day they want, and nobody does anything about it. Look at this point. In 2015, the typical U.S. household earned $56,500, and China trade saved families about $850 a year. That is nice until a hammer drops. Industry needs to pay attention to good business planning and listen to economists and (yes) even federal agencies that encourage reshoring and retention of manufacturing jobs in the U.S. and away from, especially, China.
A way to do all of this is to contact your member of Congress, and find if the lizard has a clue what you are talking about. If the lizard is a liberal/socialist, you might drop the concepts of tax incentives and potential reshoring subsidies for consideration. It’s not every day that you’ll have a chance to help your country using someone else’s dime. This column is trying to alert you to the serious matters described. They are as important as anything you’ll read all week.