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."
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This is no doubt true at the moment but the situation is moving rapidly and the use of China as a manufacturing hub has other consequences besides providing wealthy Western and Asian firms with a low cost, profit enhancing alternative to domestic labor.
For example, Chinese labor - at all levels of expertise (from line assembly to engineering and advanced research)- is employed in the manufacturing matrix. This requires a massive knowledge and skillset transfer that enables Chinese sub-contracting firms to master sophisticated techniques (the Rubbermaid example is instructive here).
Given enough time, it's not inconceivable that Chinese firms, having handled almost all the logistics, will compete directly against, or buy out their non-Chinese customers.
An example of this sort of thing is the IBM/Lenovo deal -
<http://en.wikipedia.org/wiki/Lenovo>
Lenovo, little known in the US outside of specialist circles, was already manufacturing computers for IBM. After the firm's level of expertise and capitalization had reached sufficient mass, an outright purchase of their client's computer manufacturing division (which was theirs in all the important technical ways) became feasible and attractive.
This allowed IBM to all but completely get out of the manufacturing business and focus on the much more profitable services market.
In years to come, we will almost surely see many other non-Chinese firms making similar decisions significantly changing the balance of ownership.
.d.
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