China offers opportunities and threats

Ted Fishman, bestselling
author of China, Inc

Monday,  January 23, 2006

As the largest country in the world for cheap labour, China has been squeezing out manufacturers around the world as it floods the market with products at rock bottom prices, even after the importing countries have tacked on hefty tariffs. 

Current estimates of China’s population are between 1.3 and 1.6 billion people. To understand just how large this number is - the rounding error of 300 million people is higher than the population of the US, Canada and the entire Caribbean combined.

With the pressure to feed and house that massive number of people, China’s government will do what it has to do, including reverse engineering patented technology and drugs, pirating software, and copying high priced designer products, according to Ted Fishman, the best-selling author of China, Inc who spoke at the Business Outlook 2006 conference at The Ritz-Carlton Grand Cayman on 18 January.

“In the last 20 years, 12 of those full steam, there have been over 85 million new private businesses opened in China,” said Mr Fishman. 

“Consider that the US has been practicing capitalism for 350 years and it only has 26 million private businesses.

“With 85 million companies, it is always looking for customers wherever they can find them. And to stay competitive, they are willing to change the nature of their business overnight.”

For example one Chinese company in Shanghai had become the biggest manufacturer of alloy hubcaps in the world, but it saw an opportunity in making jeeps. So virtually overnight it went into the auto manufacturing business.

Instead of manufacturing them through high technology, they were being hand-built by hundreds of workers and still selling the jeep wrangler model, which would sell for US$32,000 in the US to the Middle East for US$12,000. 

He added that many traditional products such as Christmas ornaments in Bavaria, Germany are now being manufactured in China. With over 100 million people willing to work at the world’s lowest prices as well as paying nothing for software, processes other high technology, it makes it difficult for other countries who are paying for it to compete, noted Mr Fishman.

Moreover, he suggests the country is forcing manufacturers around the world to cut their prices as it struggles to keep up with the abundance of cheap products that are produced in China. 

Additionally, since China has a high number of highly educated and skilled professionals, it can easily provide services such as graphics, websites, accounting and information technology jobs at bargain prices to local companies.

It also has the potential to provide legal and financials services. 

However, Mr Fishman explained that since China does not respect intellectual property and it has proven how easy it can change businesses, there is a danger in having specialised business processes that were developed here copied. 

On the other hand, as the country gains wealth, the country will also need to find ways to invest its money just like the rest of world and that will provide an opportunity for companies from the Cayman Islands to expand in Asia. 

Mr Fishman said that under its Communist rule, the government has controlled much of the people’s access to the outside world including travel. 

With a growing middle class of 150 million who are curious about the outside world however - it only takes a small percentage of that number to make a significant impact on the local tourist sector. 

shurna@caymannetnews.com

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