China: Supply Chain Friend or Foe?

[I AM NOT THAT GUY 5,715]

Is China a supply chain friend or foe?

It is actually a very interesting and complex question.

I will also note, given our growing international audience, that I am writing this from a largely US point of view, though much of it is relevant no matter what country you live in. Some is US specific, however.

I have been preparing to write this column for some time - clipping articles, saving web links – but am moving it up in the schedule due to the “Google event” of last week.

I suspect many of you heard that headline, but did not dig too deep into the details. It is actually quite a story. Last week, Google said it had discovered a cyber attack that happened in December, in which the “hackers” were trying to access the Google email accounts of hundreds of Chinese activists. That’s what most of us heard in the headline.

That’s bad enough, but it turns out, there was more. The attacks targeted at least 20 other companies and maybe as many as 34. That included companies like Dow Chemical and defense contractor Northrup Grumman – the hackers apparently hunting for trade secrets and software “source code.”

The attacks nominally came from Taiwan, but “that are thought to be linked in some fashion to the Chinese government or proxies,” the Washington Post reported.

How nice. And this is just one of a series of such cyber spying incidents by China over the past few years.

I am generally a free trader, though I think the loss of US industrial capacity is reaching the point of long-term danger to the country’s interests, as I have discussed before. My focus today is not so much on global trade generally, but specifically on China itself.

Unfortunately, in a sense, “demography is destiny,” and the reality is that a country of $1.3+ billion people is at some point going to exceed economically and perhaps most other areas a country with some 330 million people, which is about where the US is. (The population of European Union countries in total is about 500 million).

The migration of sourcing by US companies from the US or other countries to China has been breathtaking. As we noted last week in our review of the Decade in Supply Chain, Chinese imports were $100 billion in 2000, and $338 billion by 2008 – that’s an astounding 238% gain in just eight years. Incredible, when you think about it.

And those flows were mostly one way: the US trade deficit with China in 2008 was $268 billion – meaning only some $70 billion of goods were exported from the US to China.

That fact alone obviously concerns many business, political, and labor leaders, on many levels. To cite one of the most prominent, China now owns more than $1 trillion (with a “T”) in US government bonds, on which the US is dependent to fund its huge budget deficits. That gives China quite a bit of clout regarding US economic policy – a direct result of soaring US trade deficits with the country.

But in the end, here is my point: some of this would be worrisome enough if it were occurring with a solid “friend” – let’s say Japan. But does it not often look like China, despite our clear economic integration – is also about as much a “foe” as friend? And does this change about how you think might think about these trade issues?

http://www.scdigest.com/assets/FirstThough...p;ctype=content

[Nagishkaw 510]

Chinese imports were $100 billion in 2000, and $338 billion by 2008 – that’s an astounding 238% gain in just eight years. Incredible, when you think about it.

I wonder what percentage is dog and cat fur?

http://www.dailymotion.com/video/x140lm_ch...nvestig_animals

[Calypso 464]

I wonder what percentage is dog and cat fur?

http://www.dailymotion.com/video/x140lm_ch...nvestig_animals

I've just seen the video. That was really cruel.

[Darnell 8,478]

Oh well - I think the 'original author' needs a bit more research on how 'copying' works in China.

[Nagishkaw 510]

I've just seen the video. That was really cruel.

Beyond. There are no anti-cruelty laws there.

[Calypso 464]

Beyond. There are no anti-cruelty laws there.

After earthquakes, monsoons, and Chinese product recalls, Mother Nature seems to have established her own Animal Humane Society act.