This is China! blog

A local Suzhou television news reported highlighted an odd disconnect in the local labor market: local factories are looking to hire, and the unemployed are looking for jobs. The report, in many ways, was more an infomercial for the company, its products, its working conditions and its labor requirements, which is likely how the issue became a news items at all. The news reported went to some labor markets and talked to young people who were looking for jobs. The interviewees were unaware there was a labor shortage. Perhaps these were the unemployable.

The China Economic Review in its November issue highlighted the matter as well, citing that:

“From the factory towns of Dongguan to the trestle tables of Wenzhou, bosses are moaning about labor shortages. Suzhou reported 150,000 – 200,000 job vacancies in September, while vacancies in Shenzhen rose from 23,000 in April to 120,000 in August.”

A combination of late Christmas orders from the West and folks who just don’t want to relocate yet again from their hometowns to factory campuses is creating staffing shortages in China’s export sector. Also, the central government’s infrastructure projects in the interior of the country has seemingly creating enough economic gravity to keep folk’s within the orbits of their hometowns. A hobbled export sector will only make it more difficult for China’s policymakers to keep GDP growth above 8% without additional fiscal stimulus. 9 Nov 2009

A point came up recently during a conversation with a journalist friend in Shanghai: Chinese State Owned Enterprises (SOEs) can only be just so efficient. What with tens of thousands of employees at the state-run oil companies, railway companies and banks, and the State’s explicit pact to maintain employment levels, investing in labor-saving technologies is not the highest priority on company lists. In particular, we were talking about the wind industry, in which within the last five years the proportion of foreign investment fell from 70% of the market to 30%. Western arguments of superior technologies fall on deaf ears when the Chinese government is interested in market dominance, not labor productivity. Good enough will do just fine when it comes to pushing out the competition.

A CNN report a couple weeks ago asked a salient question:

…. The U.S. ought to set aside its current economic insecurity and answer a simple question correctly: If the Chinese want to park more of their money in American assets (besides Treasury bills), why wouldn’t we open our pockets and take it?

Personally, I think if Chinese acquisition of American assets becomes a major trend, the United States government needs to look closely at and revise policies that reversed decades of domestic asset development and led to the fire sales Chinese buyers are after now. Of course, instead, politicians will point fingers across the aisle at one another and CNN will file a special report titled, “America for Sale: How did we let this happen?”

A German friend sent me a text message recently after the Chinese General Manager of a Nanjing factory had canceled the interview he had arranged with her. He was interested in working with my highly capable friend to implement quality controls and document systems in the company. The text read: “That boss is going to meet me after the 28th he is drunk [sic] cause of meeting that he had all day and tomorrow morning he has to fly to Xian so I meet him after the 28th … What does that mean when Chinese behave like that?”

To which I suggested if that’s the job she wants, she’d better lower her expectations for actually having a boss who knows how to manage. Of course, the boss would merely respond, “Chinese Way.”

While visiting my friends at the EastWind Precision Engineering booth at the Pharmaceuticals and Medical Equipment Show at the New Shanghai Intenational Exhibition Hall (27 October – 29 October 2009) I made a couple observations: the overwhelming majority of buyers were Chinese; the Chinese buyers spent most of the time in the Western pavilion stroking the latest CNC equipment, mostly German and Swiss, all shiny stainless steel with seamless computer displays. The Chinese-makers’ side of the show saw mostly equipment out of the Charlie Chaplin movie Modern Times, great hulking beasts bristling with dials and gauges. Westerners were not swarming all over Chinese vendors to create joint ventures, and Chinese buyers weren’t so interested in the Chinese stuff. Instead, the smart money is on the future. A sure bet.

It’s easy to think China has a master plan for buying up the world when you see New York Times headlines gush, “

Chinese and U.S. Partners to Build Big West-Texas Wind Farm”:

“Construction of the $1.5 billion wind farm would be funded largely by Chinese financiers, with an assist from the United States government in the form of loan guarantees and grants from the federal stimulus package.”

Look a bit more closely, and it seems the American government has given the overwhelming number of awards for alternative energy research and implementation projects to foreign companies. Investigative Reporting Workshop cites that instead of the American government encouraging homegrown wind machinery producers, it’s giving the cash incentives to foreign producers, mostly European, it seems.

“The reliance on foreign companies for development of wind energy appears to be at least partially tied to the U.S. government’s resistance to subsidize a home-grown wind energy industry until now. With so few U.S. companies in the business, the door was open for foreign companies to walk away with the bulk of the grants. European companies, in particular, are well positioned to collect stimulus benefits for clean energy.”

So if the door is wide open and the welcome mat put out for foreign – including Chinese – producers, who can blame them for making themselves comfortable in The Land of Opportunity?

A GM told me in Shanghai recently that one of his local Chinese suppliers cancelled production of an order my friend had queued weeks before. The supplier explained the factory had chosen instead to fulfill and order from an American company that had ordered the maker’s full kit, not just some components. The Americans were going to pay a lot more, too, and the order was going to put pressure on the the factory’s capacity. Of course, my friend was not pleased by the change, especially as his order was to begin production at the beginning of November.

Chinese vendors are notorious for dropping customer obligations when another, apparently more generous customer appears at their doorsteps with purse open. One American GM told me how a hotel in Kunshan had cancelled his banquet to take on a larger project, but did not tell the GM until he and his cortage showed up at the restaurant to eat. And then there was a young Chinese woman’s wedding banquet that got bumped here in Suzhou when a much larger party paying much more per head pushed her off the social calendar. If Chinese brides aren’t even safe, what can Western GMs expect?