PRC Economy - New Reflections : Dec 15 2011

wong · Post by **wong** » 21 May 2013 01:56

Theo_Fidel wrote:
It definitely helps to have more years of education for even the most simple of jobs. This is how productivity in the west can be so high. Since China's manufacturing productivity despite it good infrastructure is lower than the west the explanation for lower output has to fall on some form of education snafu.

Labor is but one component of manufacturing productivity. Capital/Machines and Management Quality are other factors that greatly effect manufacturing productivity. As Chinese wages rise, you'll see higher and higher Chinese labor productivity as factories invest in automation to offset higher wages (this is happening already). Management quality will also rise as more Chinese managers get that western MBA (remember, they've only been at this capitalism thing for 30 odd years). So in short, it's not only the education level of the laborer. Hardly. US and UK primary public education (especially in the inner cities) is nothing to write home about and yet they have high manufacturing productivity for the reasons I gave.

And you're completely wrong about "so much of the wests effort goes into maintaining existing investments made over 100+ years that there is lower ability to expand service area" that I don't even know where to begin.

This is all a joke, right ??? You don't really believe the non-sense you're saying?

subhamoy.das · Post by **subhamoy.das** » 21 May 2013 10:44

http://economictimes.indiatimes.com/new ... 162208.cms

Another pointer as to who is driving consumption of the luxary brands in China. No points for guessing

Prem · Post by **Prem** » 24 May 2013 00:29

http://www.businessinsider.com/blankfei ... yet-2013-5
BLANKFEIN: Don't Worry, Goldman Isn't Giving Up On China Yet

Last night's bad PMI number seems to have been the tipping point in a recent build up of bad Chinese data that came in last month. This morning, the Nikkei fell by 7.3%, and markets around Europe are down as well.News from Goldman Sachs earlier this week probably didn't help either. The bank exited the massive investment it made in the Industrial and Commercial Bank of China back in 2006. It was made even before ICBC became the 2nd biggest IPO in history. The stock, though volatile to say the least, is up 57.1% since that year.
So, even though Goldman has sold off pieces of its stake in ICBC five times since it 2010, with all this bad news coming out about China, it's hard not to ask — why now? Does Goldman buy the China bear argument that the increasing cost of credit in the country will cripple growth?Goldman Sachs CEO Lloyd Blankfein was on Bloomberg TV this morning giving a firm answer amidst all the chaos.
Here's what he told anchor Erik Schatzker:
"Well, first of all, catch the wave when it comes-- I don't know if you've been watching but there has been a wave and it's been going on for quite some time. It may be interrupted. ICBC, again, is not the key to our interest in China or the big reflection of it. ICBC was an investment we made at a time when China was taking its banking system public and was looking for partners-- really, kind of quasi-strategic partner-- to help-- not only provide investment capital but also expertise. And so they wanted firms like ourselves. And there were other financial institutions that partnered with other banks. And so we ended up holding that investment for a while. But through that investment we became very close with important people in the banking system. And we maintain that relationship today. We're investing in China because China-- I was going to say it's the future-- but it's a big part of the present as well."Blankfein went on to say that Goldman would be happy to make an ICBC sized investment again, but the time would have to be right.Does that calm anyone's nerves?

Christopher Sidor · Post by **Christopher Sidor** » 25 May 2013 19:57

Goldman likes to catch the wave when it is building up and sell it as close to crest as possible. Or when the gains would not be that high. It does not mean that gains would not be there or a trough is coming. That is how money is made. One makes money by buying on cheap and selling high. One does not make money by buying when market is rising, a fools attempt which we all do. By the time market starts to rise one has to be already invested. So Goldman is doing what it meant to be doing. Also note Goldman said that

BLANKFEIN: Don't Worry, Goldman Isn't Giving Up On China Yet http://www.businessinsider.com/blankfein-goldman-isnt-over-china-yet-2013-5#ixzz2UJf3kPYd wrote: But through that investment we became very close with important people in the banking system. And we maintain that relationship today.

So it is not an indicator that things will go down. We should not be reading too much into what Goldman is doing or not doing. Rather we should be paying attention to other economic indicators.

Prem · Post by **Prem** » 09 Jun 2013 07:22

http://www.businessinsider.com/chinese- ... sts-2013-6
Chinese Trade Numbers Come In Massively Below Forecasts

It also missed a medium forecast of 5.6 percent expansion in a Dow Jones Newswires' poll of economists.Imports dropped 0.3 percent to $162.3 billion, said the statement, down from a rise of 16.8 percent in April and well below the economists' median forecast of a five percent increase.Trade surplus stood at $20.4 billion last month, it said, widening marginally from the previous month.The disappointing performance was due to "a slowdown in the domestic economy, sluggish foreign demand, companies' high costs, the appreciation in the yuan's real value and a worsening trade environment", customs said.It was also a result of a crackdown on misreporting by importers and exporters, it added. They may have overstated their business to seek to evade Chinese government controls on capital movements and channel funds into the country, he said.Two-way trade between Hong Kong and the Futian Bonded Area, in the nearby Chinese city of Shenzhen, soared by "an extremely abnormal rate" of six times in the first quarter of the year, state broadcaster China Central Television reported Saturday.A truck carrying the same batch of electronic products crossed the border 54 times in 11 days in April, each time logged onto the customs' record as a new shipment, it said.The world's second-largest economy registered 7.8 percent growth in 2012, its slowest rate in 13 years.The government in April announced a surprisingly weak expansion rate of 7.7 percent for the first quarter, dashing hopes that growth was poised to accelerate in 2013 after showing strength at the end of last year.More recent economic indicators also failed to improve the outlook, with manufacturing activities in the country coming in at a contracting eight-month low of 49.2, according to a survey by HSBC this week. A figure below 50 indicates a contraction."Growth in exports to all major developed economies slowed... suggesting a recovery in the global economy is yet to be strong," Tang Jianwei, a Shanghai-based economist with the Bank of Communications, told AFP."Domestic demand has continued to be slack, affecting imports of commodities and raw materials."He also noted that rising trade disputes between China and major trade partners have had a "rather big negative impact" on the country's imports and exports.On Tuesday the European Commission imposed anti-dumping duties on imports of Chinese solar panels. Beijing responded immediately with an announcement of an anti-dumping probe into European wine, widening a row that has already involved telecom equipment, chemicals and seamless pipes.The world's top exporter is also embroiled in trade disputes concerning other products with countries including the United States and Japan.
ANZ Bank analysts said the prospects for China's exports looked "grim" due to trade frictions and a strong Chinese currency, which has gained almost 20 percent against the yen this year."We believe China's loss of competitiveness relatively to ASEAN and Japan will gradually show up in China's export data in the following months, which will have dire consequences to China's already weak job markets," said Liu Ligang and Zhou Hao in a research note.But Tang said the monthly change in trade data is unlikely to prompt the government to take any immediate measures."The Chinese leadership is much more tolerant of slower economic growth than in the past. They want to focus on reforms," he said.Chinese leaders have said expansion will slow in the next stage of the nation's development from the near-double-digit yearly rises of recent decades, as they try to retool the economy to emphasise consumer demand as the key growth driver, rather than investment and exports.

TSJones · Post by **TSJones** » 09 Jun 2013 13:41

China tries to control pork prices. Seeks US know how:

http://www.nbcnews.com/business/little- ... 6C10241539

paramu · Post by **paramu** » 10 Jun 2013 23:29

US china relationship including pork prices is not relevant in this thread

Abhijeet · Post by **Abhijeet** » 14 Jun 2013 11:41

Was speaking with someone running a China-focused online game startup in the Bay Area. Some interesting points:

- China this year will surpass the US to become the largest online game market in the world
- Most gaming is still PC-based massively multiplayer online (MMO) games -- think World of Warcraft, but homegrown Chinese games. Smartphone-based gaming is rising quickly. Tablets still relatively small.
- By 2015, more smartphones will be sold in China per year than smartphones+dumbphones in the US and Europe combined
- Internet cafes are still big despite increasing home PC usage. This is partly due to social reasons. (I've seen this same behavior in South Korea where basically everyone has a PC, but they still get together at their neighborhood gaming cafe to hang out.)
- There are over 500 app stores -- both legal on the Android side and illegal ones for jailbroken iOS devices. Basically anything goes in terms of the quality (and originality) of games sold.

There is a very robust gaming economy in China that is entirely missing in India. There's a lot of spending on what is basically a first world pursuit. It indicates not just disposable income, but other widely available infrastructure -- reliable electricity, reliable and fast Internet, easy access to computers -- that India still struggles to provide.

Singha · Post by **Singha** » 14 Jun 2013 12:04

in terms of infra atleast 300 mil chinese (25% of pop) maybe more have access to first world std and probably a lot better than khan / eu rural areas. think roads, rails, buses, metro rail, schooling, 24x7 power, water supply, sedan cars, broadband internet and 3G, consumer durables .... even the cheen people living in converted shipping containers due to expensive housing have washing machine, TV, internet, electricity per photos.

a relative of mine works in water purification products that are sold across the world and has access to test sample reports. he told me the quality and pressure of municipal water supply in cheen cities is far superior to india. this is infact imposing special challenges on adapting same product here, because things tend to crap out a lot sooner here due to more challenging water quality and low pressure. it cannot be simply dropped here and expected to work.

there is no comparison and the INC is dedicated to keeping it that way and driving us down further

how can there be a comparison between a economy with per-capita income X and another that is 3X.
just as china:usa is a 3X ratio and is not a honest comparison. but diff is they are closing the gaps first, while we have our thumb up our backsides and voting in the INC term after term for caste, religion and "local governance"

member_20292 · Post by **member_20292** » 14 Jun 2013 13:21

^^^

so, what sort of china focussed company can be started with the unique selling points that india has?

Online english tutor?

Singha · Post by **Singha** » 14 Jun 2013 13:30

the beauty of cheen is they are trying to make everything from low cost rubber chappals to aeroplane engines.
other than very high tech products(weapons,chips,optics,robots,engines) and bulk food/raw materials they dont need any imports of medium or low tech products it all inhouse. so Massa which is a strong player both in high tech and in farming/mining, ironically has more exportable products to Cheen than anyone on earth!

in terms of soft media like books, comics, films, songs again massa is the dominant world power. financial services and products again nobody is near massa is sheer skill at wheeling dealing and coming up with new schemes.

subhamoy.das · Post by **subhamoy.das** » 14 Jun 2013 20:07

That is a bad strategy to manufacture everything. It will make u jack of all trade and master of none. And that is exactly what is happening with Chinese products. They have products in all forms and shapes but not a single MNC in products. It has been like this for last 30 years. Even then there were no CHINESE products worth the name and today also none worth the name. This is really the intriging question which has gone un answered.

Theo_Fidel · Post by **Theo_Fidel** » 14 Jun 2013 21:41

We have only just begun making the infrastructure investments that will be needed.
For instance Chennai finally has its (2) x 100 Million liter a day desalination plant operating.
More are on the way. So for the first time we can start thinking of things like 24x7 water supply.
Chennai metro water budget in 1997 was 35 crore IIRC. This year it is ~ to Rs 1,000 crore.

BTW here is typical utility cost from Shanghai.

-Landline 250 Rmb/month (wife calling home near Shanghai)
-Internet 130 Rmb/ month (2 Mbit/s connection, ADSL)
-Cable TV xxx Rmb/month (have never seen a bill in the new place, but was 30 Rmb/month in the previous)
-Electricity 1000 Rmb/ month (an averate / month including heating/cooling of 300 sqm townhouse, incl water heater)
-tap water 60 rmb/month
-drinking water 2* 4 gallons 38 Rmb / month (mineral water)
-gas 80 rmb/month (we cook home a lot)
-gsm phone 10000 Rmb/ month (ok, i am using it overseas too)

When all india city residents pay these rates we too will get first world infrastructure.

Singha · Post by **Singha** » 14 Jun 2013 22:10

What is the rmb rupee exchange rate..we need to compare above figures in rupees.

Theo_Fidel · Post by **Theo_Fidel** » 14 Jun 2013 23:05

right now 9.3 rs : 1 rmb

Abhijeet · Post by **Abhijeet** » 15 Jun 2013 00:07

So about Rs. 3700 for Internet+phone and Rs. 10K per month for electricity.

It's a tautology to say that if Indians paid more they would get better services. Of course. The point is that Indians cannot afford to pay these rates right now because they are too poor. In China, the fact that hundreds of millions of people (far more than in India) can live with modern amenities at higher prices than in India should indicate the relative size of the economies.

Theo_Fidel · Post by **Theo_Fidel** » 15 Jun 2013 01:12

^^^^^
Not to turn this into a India thread OT...

Even people who can pay those rates refuse to.
For instance in Mumbai or Dilli I don't think there is a single person who can not pay those rates. Yet they refuse to.
They prefer to spend on other things.

Abhijeet · Post by **Abhijeet** » 15 Jun 2013 03:31

With all due respect, that is nonsense. The per capita income in Mumbai is about Rs. 1.25 lakh. For a family of 4, that's about Rs. 5 lakh in annual income. Do you seriously think that that family could pay Rs. 1.2 lakh a year -- 24% of its annual pre-tax income -- in electricity bills? And there are a lot of people earning less than the average (obviously).

=======

More generally, this theme seems to be one of the most popular on BR. Indians don't spend not because they are poor, but because they don't want to. This is no doubt a very comforting thought, but it fails when you apply it at a macro level. After all, that extra money that Indians have but don't spend has to show up somewhere. If all product categories show sales that are a fraction of China's, then the money that we claim Indians have must be saved. Yet all banks in India are still small compared by size of deposits to Chinese banks.

Investment is another place people can put their money, but retail investors are a small part of the Indian stock market, and the total stock market capitalization in the country is still smaller than that of Chinese exchanges (even ex-HK).

So where's the money?

Of course, black money explains everything -- it means that India's economy is miraculously 3x bigger than the officially quoted number, while still explaining anemic sales of consumer products and small bank deposits. Like dark matter, black money is required so that the universe makes sense.

I do wish people would stop clinging to these internally contradictory beliefs.

chola · Post by **chola** » 15 Jun 2013 18:10

subhamoy.das wrote:That is a bad strategy to manufacture everything. It will make u jack of all trade and master of none. And that is exactly what is happening with Chinese products. They have products in all forms and shapes but not a single MNC in products. It has been like this for last 30 years. Even then there were no CHINESE products worth the name and today also none worth the name. This is really the intriging question which has gone un answered.

There is really no bad strategy to manufacturing for piss-poor third world nations the likes of China, Angola or for that matter India (in spite of our Bangalore snobs wanting to focus on IT onlee.)

The idea is to get whatever manufacturing you could and as many jobs to the masses as possible. Most nations outside of the West and Japan-Taiwan-SoKo cannot build industry of scale even for one item never mind the insane array that the chinis produce. They did it to provide jobs on a massive scale pure and simple.

MNC manufacturing are leaving China into Vietnam, Bangladesh, the Philippines, etc. because this strategy had already made the chinis far wealthier than when they started. It had actually made their wages and costs far less competitive.

We need to embrace this or else we will miss out once more. There is no bad strategy in manufacturing if you are not industrialized to begin with.

rsingh · Post by **rsingh** » 15 Jun 2013 22:23

^^^
.......Bangalore snobs

Since when? These are just qualified number punchers. They got the punching job because nobody else in west is willing to work for pennies. I have seen hundreds of these chaps in Brusselabad. First they try to chipko with Gora log (may I have your e-mail please, within 2 minutes of discussion, which is extremely impolite). And mind you, Goras have one thumb rule "if you do not have self respect then you are a fair game". So when you say Banglore snobs.......made me laugh. Why we have no chaps that produce likes of google,facebook,youtube,yahoo,Amazone...........why? Because we do not have planners, thinkers ,innovators and risk-takers in IT. We have followers and that's it.

Theo_Fidel · Post by **Theo_Fidel** » 15 Jun 2013 23:17

chola wrote:The idea is to get whatever manufacturing you could and as many jobs to the masses as possible. Most nations outside of the West and Japan-Taiwan-SoKo cannot build industry of scale even for one item never mind the insane array that the chinis produce. They did it to provide jobs on a massive scale pure and simple.

I don't think this is correct at all. Plenty of countries including India manufacture at scale. China-SoKo-Jpn are built for exports. Most of their stuff is made for others. India manufactures for India.

subhamoy.das · Post by **subhamoy.das** » 16 Jun 2013 11:38

Singha wrote:What is the rmb rupee exchange rate..we need to compare above figures in rupees.

Donot use the exchange rate as it is manipuated and has nothing to do with the real value of the currency. Use either the PPP exchange rate of use the local per month wage and see what % of the wage goes towards paying these bills. We can use the wage of a mid level IT engineer for example working in Sanghai and then compare the same for an mid level of IT engineer in NCR region.

subhamoy.das · Post by **subhamoy.das** » 16 Jun 2013 11:42

Abhijeet wrote:So about Rs. 3700 for Internet+phone and Rs. 10K per month for electricity.

It's a tautology to say that if Indians paid more they would get better services. Of course. The point is that Indians cannot afford to pay these rates right now because they are too poor. In China, the fact that hundreds of millions of people (far more than in India) can live with modern amenities at higher prices than in India should indicate the relative size of the economies.

I pay these rates in Kolkata. I have 24X7 electricity, clear running water, 24X7 2 wire less broad bands and 4 cell phones lines. Who said Indians cannot afford. This is Calcutta the which is way below in purchasing strength and I work for a small 100 people IT company as one of the top 3 folks. So clearly there should be millions like me if u consider India.

subhamoy.das · Post by **subhamoy.das** » 16 Jun 2013 11:45

Abhijeet wrote:With all due respect, that is nonsense. The per capita income in Mumbai is about Rs. 1.25 lakh. For a family of 4, that's about Rs. 5 lakh in annual income. Do you seriously think that that family could pay Rs. 1.2 lakh a year -- 24% of its annual pre-tax income -- in electricity bills? And there are a lot of people earning less than the average (obviously).

=======

More generally, this theme seems to be one of the most popular on BR. Indians don't spend not because they are poor, but because they don't want to. This is no doubt a very comforting thought, but it fails when you apply it at a macro level. After all, that extra money that Indians have but don't spend has to show up somewhere. If all product categories show sales that are a fraction of China's, then the money that we claim Indians have must be saved. Yet all banks in India are still small compared by size of deposits to Chinese banks.

Investment is another place people can put their money, but retail investors are a small part of the Indian stock market, and the total stock market capitalization in the country is still smaller than that of Chinese exchanges (even ex-HK).

So where's the money?

Of course, black money explains everything -- it means that India's economy is miraculously 3x bigger than the officially quoted number, while still explaining anemic sales of consumer products and small bank deposits. Like dark matter, black money is required so that the universe makes sense.

I do wish people would stop clinging to these internally contradictory beliefs.

How do u explain that we import and pay for 160T of gold in May , the world's biggest consumer. Clearly there is a local preference which drives the money and not the availaibility of the money.

Gus · Post by **Gus** » 16 Jun 2013 11:49

minus the pollution, cost to environment, poor worker environment etc, what is wrong with chinese type mfg setup and why can't we have something similar in india?

there are plenty of unskilled workers around to be put use of, so their kids can go to school and get better jobs. right now, they are working in unorganised sectors with low productivity.

expand the SEZs and make widgets and export them..

subhamoy.das · Post by **subhamoy.das** » 16 Jun 2013 11:56

rsingh wrote:^^^
.......Bangalore snobs

Since when? These are just qualified number punchers. They got the punching job because nobody else in west is willing to work for pennies. I have seen hundreds of these chaps in Brusselabad. First they try to chipko with Gora log (may I have your e-mail please, within 2 minutes of discussion, which is extremely impolite). And mind you, Goras have one thumb rule "if you do not have self respect then you are a fair game". So when you say Banglore snobs.......made me laugh. Why we have no chaps that produce likes of google,facebook,youtube,yahoo,Amazone...........why? Because we do not have planners, thinkers ,innovators and risk-takers in IT. We have followers and that's it.

The reason CHINA embrassed contrat manufacturing to create millions of jobs, we Indians embrased contract knowledge service to create millions of jobs. Natually once the low level jobs are created the expectatin that the jobs higher up in the value chain should also get created after say 20/30 years. I am not sure about CHINESE manufacturing jobs if they are now creating more desing job or not - does not seem so as there is still no branded product from CHina , and to some extent the same is true for Indian knowledge jobs but alteast we are now snatching knowledge deals from MNCs in our home turf.

My firm opinion is that contract manufacturing cannot give the scale and quality of jobs that knowledge driven industry can and hence India is in a better shape to provide jobs to its citizens. The CHINESE are already committing 2 times more suicides than Indians for want of jobs and recent NT articles was a good remined was to the manufacturng jobs are going abegging in CHINA and at the same time teh grads are goign umeployed. Future IT enabled knowledge jobs and CHINA is desperately trying to take the course but late in the game

subhamoy.das · Post by **subhamoy.das** » 16 Jun 2013 11:59

Theo_Fidel wrote:
chola wrote:The idea is to get whatever manufacturing you could and as many jobs to the masses as possible. Most nations outside of the West and Japan-Taiwan-SoKo cannot build industry of scale even for one item never mind the insane array that the chinis produce. They did it to provide jobs on a massive scale pure and simple.
I don't think this is correct at all. Plenty of countries including India manufacture at scale. China-SoKo-Jpn are built for exports. Most of their stuff is made for others. India manufactures for India.

That is very true. India manufactures first for self and then exports the rest if available. But in IT enabled knowledge industry we did the other way round and exported first and now focusing on home.The CHINESE are doing exactly opposite.They first manufactured for teh world and now focusing on local market but in knowledge they are first focusign on home and may be later, if they can pick up the India challenge, on exports.

This is becomg a INdia ecomomy discussion.

Christopher Sidor · Post by **Christopher Sidor** » 16 Jun 2013 14:08

Gus wrote:minus the pollution, cost to environment, poor worker environment etc, what is wrong with chinese type mfg setup and why can't we have something similar in india?

Chinese manufacturing cannot exist without wanton destruction of ecology and environment. Moreover the best of chinese manufactured goods are for outsiders and not for chinese. The same can be said for indian IT industry and a large part of Indian manufacturing, like automobiles, textiles, leather products, etc.

there are plenty of unskilled workers around to be put use of, so their kids can go to school and get better jobs. right now, they are working in unorganised sectors with low productivity.

expand the SEZs and make widgets and export them..

Again the same question, do we want to make manufacturing so that the best of the products are meant for outsiders or for indians? Manufacturing is a race to bottom. one has to provide the lowest possible cost. Further the biggest margins are not in manufacturing or assembling. Consider apple products. It is apple which has the fatest of margins and not foxcon.

chola · Post by **chola** » 16 Jun 2013 15:18

Theo_Fidel wrote:
chola wrote:The idea is to get whatever manufacturing you could and as many jobs to the masses as possible. Most nations outside of the West and Japan-Taiwan-SoKo cannot build industry of scale even for one item never mind the insane array that the chinis produce. They did it to provide jobs on a massive scale pure and simple.
I don't think this is correct at all. Plenty of countries including India manufacture at scale. China-SoKo-Jpn are built for exports. Most of their stuff is made for others. India manufactures for India.

This is actually most correct, Theoji. Most countries outside the developed world of the West plus Japan and the Asian Tigers cannot build industries of scale because they cannot generate enough market for it.

Every country manufactures for itself. But there is no scale because the local market is too piss-poor to afford more. The "well, they make things for others while we make things for ourselves" is a silly excuse.

Every one of those exporting nations you said manufacture for others (China, Japan and SoKo) also buys far more TVs, washing machines, etc. per capita than Indians. Not only do they produce more of the trappings of modern life, they consume more. And they consume more by many folds not a few percentage points.

As Abhijeet said, "Where is the money" when it comes to the Indian consumer and middle class as oppose to the manufacturing economies of the Far East? Where is our gaming population? According to Das, we are a IT nation first and foremost?

chola · Post by **chola** » 16 Jun 2013 15:44

subhamoy.das wrote:
The reason CHINA embrassed contrat manufacturing to create millions of jobs, we Indians embrased contract knowledge service to create millions of jobs.

Yes, they are equal-equal when manufacturing in Japan, SoKo and Chiniland had created hundreds of millions of jobs over five decades versus 2 million jobs in Bangalore and Hyderabad. Look at the consumption level of their populations compared with ours, man!

Well, at least you are getting a larger piece of the picture now. For developing nations, jobs are the key.

Listen and think carefully, this is economics 101.

1. Without jobs, the local market cannot growth.
2. Without markets, jobs can't grow.

This is the Catch-22 impasse that all developing nations face and why most remain poor.

The only way to break that impasse is to find foreign markets. But unless it is oil, foreign markets will not take your stuff unless you build to their standards. That is where MNCs and FDI come in. This is how the PacRim developed itself.

My firm opinion is that contract manufacturing cannot give the scale and quality of jobs that knowledge driven industry can and hence India is in a better shape to provide jobs to its citizens.

Can you get more pie-in-sky, more naive than this statement?

Now, the IT industry is wonderful. It can create a wealthy class. But it is almost entirely a phenomenon of the Fortune 500 and Western governments. It depends on a very developed set of organizations willing to send work to the Wipros and TCSs of the world. It cannot and will not be a large enough industry to employ the hundreds of millions of Indians even if they could all code in Java or what have you.

A refrigerator can sell anywhere in the world except the two poles. Good luck selling BPO service or a Java developer outside the US and Europe. Haier and other chini companies making crappy refrigerators and washing machines are breaking into markets across Africa and South America. They also supply Walmart and Best Buy. Meanwhile, 80% of Wipro revenues come from the US and UK. Tell me who will scale better on jobs?

Hari Seldon · Post by **Hari Seldon** » 16 Jun 2013 16:06

There's no doubt that India has now way but to embrace mass manufacturing to create jobs by the million for our masses. No other way out.

Luckily, the japanese want to help because diversifying from PRC has become an imperative for them. We should grab such offers with both hands and then some.

A change in govt after the next polls too might help bigtime if the policy paralysis ends and a genuine 'federalism' happens whereby decentralized decision making in tricky issues like labor law and land acquisition can be coded into law and passed on to the state level.

Let the brighter and better states blaze the path ahead, laggards can follow. Or so I hope.

chola · Post by **chola** » 16 Jun 2013 16:16

Christopher Sidor wrote: Again the same question, do we want to make manufacturing so that the best of the products are meant for outsiders or for indians? Manufacturing is a race to bottom. one has to provide the lowest possible cost. Further the biggest margins are not in manufacturing or assembling. Consider apple products. It is apple which has the fatest of margins and not foxcon.

There are margins and then there are jobs. Look, I'm free marketer by intellect so I love margins and, indeed, my career has been made on increasing margins for the corporations.

The only reason we have the IT industry in India is because US firms are pushing for margins by replacing high priced Americans with lower priced Indians.

If Indians are looking for the same margins as Western firms then we would never get those jobs. So true, Apple gets the most profit and Americans benefit from most of the Iphones. But there are a million jobs at Foxconn from the Apple contract for a piss-poor third world nation.

Until our brands have enough cachet to demand the higher margins, turning up our noses at the jobs means we get neither.

chola · Post by **chola** » 16 Jun 2013 16:44

Hari Seldon wrote:There's no doubt that India has now way but to embrace mass manufacturing to create jobs by the million for our masses. No other way out.

Luckily, the japanese want to help because diversifying from PRC has become an imperative for them. We should grab such offers with both hands and then some.

A change in govt after the next polls too might help bigtime if the policy paralysis ends and a genuine 'federalism' happens whereby decentralized decision making in tricky issues like labor law and land acquisition can be coded into law and passed on to the state level.

Let the brighter and better states blaze the path ahead, laggards can follow. Or so I hope.

With or without Japan, there is a massive flood of jobs coming out of China now because they are running out of workers which in turn is pushing wage hikes to unsustainable levels. If there is any argument to what create more jobs, this is it. China, with a 1.2 billion population is running out of affordable workers.

Look, we are at great turning point right at this instance. The world is in a period similar to the 1960s when Japan and the Tigers took off and in the 1980s when the PRC took off.

In the 1960s, manufacturing jobs flowed from the West to the East to build up Japan, SoKo and Taiwan. In the 1980s, jobs flowed from both the West and the East to China. Each time, rising living standard made margins too thin in the developed parts of the world and jobs flowed out.

Truth is global manufacturing had already done its job in those places. And it has most recently done its job in Chiniland. Each nation this manufacturing wave passes through becomes newly wealthy. You could name them in chronology -- Japan, Hong Kong, Taiwan, Singapore, South Korea and now China. This is why the chinis have a gaming population.

If we let this opportunity pass again then we'll wake up one day and find ourselves behind Bangladesh who, by the way, is now the world's second largest textile exporter behind the wave of Western and chini companies fleein the PRC wage vice.

member_20292 · Post by **member_20292** » 16 Jun 2013 17:00

kya banaein saar?

it is still ultra difficult to make anything here and starting a business is very tough.

so, for service class people to leave their stable jobs to start a manufacturing unit is very chancy.

more people leave to start IT outfits than anything else.

Theo_Fidel · Post by **Theo_Fidel** » 16 Jun 2013 21:13

Chola,

Please continue in India economy thread. See my response there...
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Oh! BTW wages in China are rising because of falling work force, esp in the young 30-45 cohort. The younger single child generation has no interest in eating bitter tears. And as we have documented here has a tendency to commit suicide than suffer mis-treatment. Also labor force is dropping from 750 million workers to under 700 million in the next 10 years, after which comes the free fall....
India has roughly 500 million workers and rising still in the young cohort.
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And oh! yeah! bangladesh is what we should now aspire to.

Christopher Sidor · Post by **Christopher Sidor** » 17 Jun 2013 19:59

chola wrote:
Christopher Sidor wrote: Again the same question, do we want to make manufacturing so that the best of the products are meant for outsiders or for indians? Manufacturing is a race to bottom. one has to provide the lowest possible cost. Further the biggest margins are not in manufacturing or assembling. Consider apple products. It is apple which has the fatest of margins and not foxcon.
There are margins and then there are jobs. Look, I'm free marketer by intellect so I love margins and, indeed, my career has been made on increasing margins for the corporations.

The only reason we have the IT industry in India is because US firms are pushing for margins by replacing high priced Americans with lower priced Indians.

If Indians are looking for the same margins as Western firms then we would never get those jobs. So true, Apple gets the most profit and Americans benefit from most of the Iphones. But there are a million jobs at Foxconn from the Apple contract for a piss-poor third world nation.

Until our brands have enough cachet to demand the higher margins, turning up our noses at the jobs means we get neither.

Then that is what we should be aiming for. Not for working as coolies in a different drab for the north Atlantic countries. Prior to independence it was slavery. Post independence it is like a prison described by Morpheus in Matrix, a prison one cannot touch or feel or sense. Prior to independence our best produce went to the west. Even after independence the same thing happens. What has changed is a white government for a desi government.
Sorry for being so negative. But we have to look truth in the eye and not shrink from it.

anishns · Post by **anishns** » 20 Jun 2013 03:23

China’s Economic Empire

http://www.nytimes.com/2013/06/02/opini ... wanted=all

Jai Hu Jai Mao and all that!

subhamoy.das · Post by **subhamoy.das** » 24 Jun 2013 11:49

chola : u are making one basic mistake of pedling the myth that outsourced manufacturing generate tons of jobs and that these jobs can be done by low skill workers. U need to visit any modern efficient shop floor and u will get the picture. So that leaves India to do branded manufacturing and flood the word which is pie-in-the sky dream. If u are business man then u will think twice before u go that route!

IT enbled sevcie can be sold to countries outside the western world once they have the pocket to buy them. Right now they can afford cheap products from China but as they grow weathier they will buy service and we can sell them. I think Indian MNCs already are selling telecom service in Africa in a big way is a good pointer of things to come.

subhamoy.das · Post by **subhamoy.das** » 24 Jun 2013 11:50

http://economictimes.indiatimes.com/mar ... 738443.cms

Chinese banks sinking! so much for manufacturing your way to nirvana!

vina · Post by **vina** » 24 Jun 2013 13:55

Yeah Subhomay. Shanghai composite index cracks close to 7% today after PBOC tells the banks to clean up the balance sheet.

Expect spasms of pain to ripple through the entire "Shanghai Model" economy if this is followed up by the inevitable rate increases in the heels of the US (to maintain the near fixed peg , or inflation in China starts galloping) . Salad days are over for a whole host of chinese cost warriors who ran shop based on cheap unlimited credit and used that credit to sell abroad.

And oh, the Chinese 7 day repo rate is at an eye watering 25%