G'day all,
China and Cheap Production
When it really comes down to it China just makes what is saleable. They make my high quality planes because there is a market for them. I found a company that made remote control ships for movies. The ships cost as little as a 100th of the cost of the studio type creation companies and are just amazing to look at. I have a 3.5 metre Titannic that has individual bolt marks as well as a timber deck where each scale strip of timber is hand laid. There isn't a great market for these things but much more than I expected. Boardrooms and the like rather like these huge, superbly detailed ships, even if I brought them in for RC fans and they actually come with motors, lead acid batteries, eight channel radio systems etc.
China has ended up producing all this stuff for only one reason, price. Already the super detailed WWII planes that have lower volume than other models I now buy from Vietnam because the Chinese cannot compete on price. When I started buying model planes the factory that I still do business with was paying its staff 400 yuan a month (about $50 US). A year later the wages went to 550 yuan and then 800 yuan and now the more skilled workers are commanding 1200 yuan.
At some point the increased wages are going to force the factories to actually start to think about wasted motion, and machines to replace labour and the prices of the goods will not necessarily rise much. In fact most of my goods have dropped in price every year as efficiencies have gradually been introduced because of rising wages. That really is ironic that higher wages has forced efficiencies that ends up making the goods cost less.
The whole system isn't going to last forever. Actually it isn't going to last all that long at all. I'd suggest perhaps 15 years for the really cheap labour to be transfered aroung Eastern Europe, Vietnam, India and China.
China has no ability currently to keep pace with its energy needs. This is going to have a big impact. It already has sent oil prices through the roof.
I have no idea what is going to happen in the long run but it seems to me that the cost of energy and the limits on just how much expansion one country can make to its energy system in a short time is going to change the equation far more than the wages of workers.
Regards
Richard
