Plants in Taiwan, Hong Kong and the former "Asian tigers" as well as to a lesser extent, in Japan and the West, have increasingly becoming parts suppliers for assembly in China. That China serves mostly as the final assembly point for value added elsewhere is disguised in its trade balance with the US, and greatly exaggerates it. "What China got in the past few years is only some pretty figures," notes a Chinese trade official below, "American and foreign companies have gotten the real profit."
The relative quiescence of industrial workers in the advanced capitalist countries in the face of assaults on their working conditions also has to be seen in the context of this historic shift in global production - depriving them of bargaining power, but simultaneously providing them with a flood of low cost imports as partial compensation for their stagnating incomes.
Some Assembly Needed: China as Asia Factory By DAVID BARBOZA NYT February 9, 2006
SHENZHEN, China - Hundreds of workers at a sprawling Japanese-owned Hitachi factory here are fashioning plates of glass and aluminum into shiny computer disks, wrapping them in foil. The products are destined for the United States, where they will arrive like billions of other items, labeled "made in China."
But often these days, "made in China" is mostly made elsewhere - by multinational companies in Japan, South Korea, Taiwan and the United States that are using China as the final assembly station in their vast global production networks.
Analysts say this evolving global supply chain, which usually tags goods at their final assembly stop, is increasingly distorting global trade figures and has the effect of turning China into a bigger trade threat than it may actually be. That kind of distortion is likely to appear again on Feb. 10, when the Commerce Department announces the American trade deficit with China. By many estimates, it swelled to a record $200 billion last year.
It may look as if China is getting the big payoff from trade. But over all, some of the biggest winners are consumers in the United States and other advanced economies who have benefited greatly as a result of the shift in the final production of toys, clothing, electronics and other goods from elsewhere in Asia to a cheaper China.
American multinational corporations and other foreign companies, including retailers, are the largely invisible hands behind the factories pumping out these inexpensive goods. And they are reaping the bulk of profits from the trade.
Yasheng Huang, an associate professor at the Sloan School of Management at Massachusetts Institute of Technology, explained: "Basically, in the 1990's, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China. But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."
The real losers, it seems, are mostly low-wage workers elsewhere, like the ones at Hitachi who lost their jobs in Japan, along with workers in other parts of Asia who suffered as employers began relocating plants to China. Blue-collar workers in the United States have also lost out.
Asian exports to the United States have actually slipped over the last 15 years. Factories in Taiwan used to assemble many of the world's computers; now China does. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do. And Japanese plants once manufactured the most popular consumer electronics brands, like Sony, Panasonic and Toshiba; now many of these are shipped from Chinese ports.
In fact, about 60 percent of this country's exports are controlled by foreign companies, according to Chinese customs data. In categories like computer parts and consumer electronics, foreign companies command an even greater share of control over the exports, analysts say.
Foreign expertise has been critical as manufacturing supply chains become increasingly complex, involving countries' each producing components that are then shipped to China for assembly. Such a system can render global trade statistics misleading, and some experts say that a more apt label would be "assembled in China."
"The biggest beneficiary of all this is the United States," said Dong Tao, an economist at UBS in Hong Kong. "A Barbie doll costs $20, but China only gets about 35 cents of that."
Because so many different hands in different places touch a particular product, Mr. Dong said, you might as well throw away the trade figures.
"In a globalized world, bilateral trade figures are irrelevant," he argued. "The trade balance between the U.S. and China is as irrelevant as the trade balance between New York and Minnesota."
[...]
Thousands of factories have created millions of jobs for China's low-wage migrant laborers, who earn about 75 cents an hour. But so far, Chinese companies in these industries have generally been unable to climb from basic manufacturing to design work and beyond.
Nonetheless, China's rise as a world commercial power is in striking contrast to that of Japan in the 1980's, when the Japanese were building their own brands like Toyota, Honda and Sony. China has few global brands beyond Lenovo and Haier - big companies struggling to make their names more widely known.
Chinese officials rarely miss an opportunity to argue that the trade statistics showing huge surpluses are misleading indicators of the country's prosperity.
"What China got in the past few years is only some pretty figures," said Mei Xinyu, of the Commerce Ministry's research institute. "American and foreign companies have gotten the real profit."
Still, the economy is booming, and an aggressive class of entrepreneurs is emerging at home that resembles the successful breed of overseas Chinese who built business empires during the 20th century.
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Full: http://www.nytimes.com/2006/02/09/business/worldbusiness/09asia.html?th&emc=th