Chinese Whispers or the thoughts of Chairman Ching

[Cyclezee]

Yes that's Whispers, not Wispers

Since the 80s the world's inflation index has to some extent been suppressed by the flood of cheap Chinese manufacturing with cheap Chinese labour costs.
But that is changing, Chinese labour costs are increasing by 20 % per annum, compounding this, it doubles over 3.5 years. If you do the mathematics it is an incredible exponential growth.

One electric bike manufacturer that I know quite well is investing heavily in automation to increase productivity and reduce labour costs.

He expects world economics will take a turn, as China drives up domestic consumption for their economic growth and completes for world trade with Africa, Central Europe and South American countries.

The emergence of 400 million middle class in China and with a targeted growth of 7 % that will double what they now consume in 10 years.

For 1.3 billion people, this is simply not sustainable. Imagine what commodity prices would be like in 10 years from now even assuming no extra-ordinary events happen.

You have all probably seen the recent news of the explosion of the ZhongRong factory making wheels for General Motors, an explosion at the aluminium polishing section killed 70 workers and numerous more were severely burned.

What impact does this have on electric bike manufacturing?
All aluminium fabrication factories in China have been ordered to stop work until safety inspections are completed. That means that frame suppliers have to stop work too until inspection is completed, so the effect is immediate especially for firms that don't stockpile and use the JIT (just in time) system of manufacture.

Frame manufacturers that don't already have it will have to install or update ventilation and filtering equipment in their factories at the polishing stations, and then pay for inspections and reports.

The bottom line?
This is going to up drive prices of lots of manufactured goods and cheap manufacturing costs in China will quickly disappear.
So far China has not charged for the incredible hidden and un-accounted cost in human lives, and environmental degradation, but they are starting to.

 

[Deus]

Very interesting read that John i wonder which UK suppliers will be charging more.

 

[Cyclezee]

Very interesting read that John i wonder which UK suppliers will be charging more.

If the prophecy proves to be correct it will eventually be all of them that sell bikes with any Chinese manufactured content which is probably in the region of 100%.

Of course it will not just be bikes that are effected, just look around at all the manufactured goods with Chinese content.

 

[flecc]

Many other products are partially or almost entirely dependent on China.

However, there's been an increasing trend to manufacturing in other Far Eastern countries and in India, so ultimately China could be an even greater loser. Once Japan was the dominant world supplier of a wide variety of products, but the world changes of the latter parts of the last millennium turned that around and Japan has struggled ever since with what is now proportionally the world's worst financial deficit.

China could all too easily end up in the same position.

The western world thought Mahatma Gandhi daft when he wanted India to remain a simple self-supporting agricultural nation, but I think he may have had the wisdom and foresight to see what would ultimately make for happiness.
.

 

[trex]

Very interesting read that John i wonder which UK suppliers will be charging more.

China are well known for manipulating their currency to boost export. I don't think bike prices are going to go up. Most the the manufacturing process will benefit from automation, therefore making Chinese goods cheaper, not more expensive, and drives quality up because machines are more reliable than labourers. Just look at Lithium batteries: when volume goes up, quality goes up, price per WH goes down. Same with controllers, LCD, motors and automated welding.

 

[Cyclezee]

Many other products are partially or almost entirely dependent on China.

However, there's been an increasing trend to manufacturing in other Far Eastern countries and in India, so ultimately China could be an even greater loser. Once Japan was the dominant world supplier of a wide variety of products, but the world changes of the latter parts of the last millennium turned that around and Japan has struggled ever since with what is now proportionally the world's worst financial deficit.

China could all too easily end up in the same position.

The western world thought Mahatma Gandhi daft when he wanted India to remain a simple self-supporting agricultural nation, but I think he may have had the wisdom and foresight to see what would ultimately make for happiness.
.

I seriously doubt that India will be able to compete with China when it comes to manufacturing, there are of course a few exceptions, e.g. Mittal Steel and Tata Motors.

China's global investment in many areas is huge by comparison and their thirst for natural resources has made other countries prosperous into the bargain.

One slightly unusual impact that China has made is on New Zealand.

New Zealand used to be famous for Lamb, but to day their biggest export is dairy products, i.e. milk powder, butter, and cheese, their biggest customer by far is China.

 

[flecc]

Yes, India alone is unlikely to seriously compete for a very long time, but in conjunction with all the other alternative countries could eventually seriously dent China's position. Currently large volumes of bicycle manufacturing are being migrated to other Oriental countries.

Forty years ago no-one would have believed the serious position of Japan today, illustrating how quickly a reverse can happen.

On a recent and much smaller scale, just ten years ago no-one could envisage Germany competing effectively with China in our industry.

Truly, never say never.
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