To borrow a phrase from Comedy Central television host and comedian Stephen Colbert, China makes America’s happy meals possible. This has long been the case, although America has long since ceased being happy about it.
Finding a China-basher in Washington is about as difficult as finding a haystack in a needle, at least among political, labor union, and red neck circles. The gist of their argument is that China has used its cheap labor and even cheaper currency to feed a US market hungry for its cheap products.
The China-bashers have a simple solution: RMB appreciation. If Chinese goods cost US consumers more, it would make it easier for US businesses to compete. The only other solution they can imagine is protectionism. (Interestingly, pressure on China to raise minimum wages, workers conditions and the like, and therefore export prices, has always been rather more muted. Given that a large part of China’s trade surplus with the US is driven by US manufacturers taking advantage of cheap Chinese labor to maximize shareholder returns back home, this sounds a little like the US wants to have their happy meal and eat it too.)
But while the US has been busy banging on about cheap plastic happy meals, China has been moving up the value chain. In my inbox yesterday was this from Global Sources. It seems that China is no longer content to just make the toys to sell happy meals, it is now also concentrating on making the tools to make the happy meals that its happy meal toys sell.
According to Global Sources, China’s exports of cooking appliances grew 27% to US$801 million in the first six months of 2006, and 60% of manufacturers plan to raise prices over the next 12 months.
This is partly to offset rising prices for steel and brass, but with Chinese ovens in such hot demand, pardon the pun, it is also partly because they can.
They are certainly not settling for cheap ovens for poor Americans. "Manufacturers are producing value-added models to gain a bigger share of the midrange and high-end markets," said Global Sources general manager of Content Development Michael Kleist. "Due to rising energy prices, a growing number of suppliers are also focused on producing energy-efficient models."
It is not just ovens. You name it, China is trying to produce it, and produce it better than anyone else, not just cheaper.
Washington’s China-bashers may just about be getting what they wish for. As China’s exports rise in price, they will be expecting to see a surge in production back home. The question is will they, or will they just pay more for the same goods they paid less for before?
That is where my money lies, and the argument holds whether it is import tariffs or value-adding on the Chinese side that causes the cost escalation for American consumers.
The US needs to start looking at its own expanding waistline and stop blaming its failing health on those who feed it.
A good place to start is with toys for happy meals (metaphorically, perhaps, rather than literally). It should start making its own again, and perhaps export any surplus to help boost China’s expanding domestic girth.