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When the Chinese consumer is king

Frank Newgent

Philosopher
Frank Newgent
Joined
Sep 4, 2002
Messages
7,503
http://www.siliconinvestor.com/stocktalk/msg.gsp?msgid=19593823

Mass markets were critically important in inflating America's sense of itself. As the economic historian Alfred Chandler has pointed out, Microsoft and Intel grow rich today on economies of scale just as the Ford Motor Company did nearly a century ago with the assembly line. One thousand copies of Microsoft Word or a thousand Intel computer chips role off the line in little more time than the first 100, adding only pennies to the cost of the initial production. Invention and development are already paid for, and also most of the labor.

That makes selling all this output critically important. If sales rise 20 percent a year in the Chinese mass market and only 5 percent in the much older, more saturated American market, then the pressure builds on Microsoft and Intel to make China the center of production, not merely the site of many factories, and to export to the United States as a secondary market.

In this new arrangement, the American mass market survives and grows, but China's grows more quickly and that holds Microsoft and Intel in place there, even as Chinese wages rise to the United States level. The productivity that results from economies of scale - that is, rising output per worker - generates more than enough revenue to pay the higher wages and also fattens profits, a compelling reason to stay put rather than move on to a country with even lower wages. Pressure mounts to shift research and marketing from the United States to China.

"As the Chinese become richer and their tastes move closer to those of the higher-income world, then companies that put their plants in China basically to export from there will find themselves increasingly producing for that market," said Richard Nelson, an economist at Columbia University. "That seems to be what is beginning to happen now."

China's share of the world's output of goods and services has nearly doubled since 1991, to 12.7 percent, closing in on the European Union's 15.7 percent and approaching America's 21 percent, according to the International Monetary Fund. No other nation comes close to China's explosive expansion, all of it generating purchasing power for a rapidly growing work force. India has increased its share by 33 percent since 1991, but still accounts for a meager 4.8 percent of total global output. The American share, although clearly the largest, has not changed since 1980.
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eBay kitsch like aqua and white gingham curtains and rubber duck-yellow wallpaper in a fried-egg motif sell chop-chop in Shanghai WalMart.
 
Re: Re: When the Chinese consumer is king

Grammatron said:

Except more people in America actually buy the products instead of getting a knock-off from a guy on the corner.
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I can match such a non sequitur.



(We take you now to the Oval Office.)


George Bush: "Condoleeza! Nice to see you. What's happening?"

Condoleeza: "Sir, I have the report here about the new leader of China."

George: "Great. Lay it on me."

Condoleeza: "'Hu' is the new leader of China."

George: "That's what I want to know."

Condoleeza: "That's what I'm telling you."

George: "That's what I'm asking you. Who is the new leader of China?"

Condoleeza: "Yes."

George: "I mean the fellow's name."

Condoleeza: "Hu."

George: "The guy in China."

Condoleeza: "Hu."

George: "The new leader of China."

Condoleeza: "Hu."

George: "The Chinaman!"

Condoleeza: "Hu is leading China."

George: "Now whaddya' asking me for?"

Condoleeza: "I'm telling you Hu is leading China."

George: "Well, I'm asking you. Who is leading China?"

Condoleeza: "That's the man's name."

George: "That's whose name?"

Condoleeza: "Yes."

George: "Will you or will you not tell me the name of the new leader of China?"

Condoleeza: "Yes, sir."

George: "Yassir? Yassir Arafat is in China? I thought he was in the Middle East."

Condoleeza: "That's correct."

George: "Then who is in China?"

Condoleeza: "Yes, sir."

George: "Yassir is in China?"

Condoleeza: "No, sir."

George: "Then who is?"

Condoleeza: "Yes, sir."

George: "Yassir?"

Condoleeza: "No, sir."

George: "Look, Condoleeza. I need to know the name of the new leader of China. Get me the Secretary General of the U.N. on the phone."

Condoleeza: "Kofi?"

George: "No, thanks."

Condoleeza: "You want Kofi?"

George: "No."

Condoleeza: "You don't want Kofi."

George: "No. But now that you mention it, I could use a glass of milk. And then get me the U.N."

Condoleeza: "Yes, sir."

George: "Not Yassir! The guy at the U.N."

Condoleeza: "Kofi?"

George: "Milk! Will you please make the call?"

Condoleeza: "And call who?"

George: "Who is the guy at the U.N?"

Condoleeza: "Hu is the guy in China."

George: "Will you stay out of China?!"

Condoleeza: "Yes, sir."

George: "And stay out of the Middle East! Just get me the guy at the U.N."

Condoleeza: "Kofi."

George: "All right! With cream and two sugars. Now get on the phone."


By James Sherman
 
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