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'Made in China' labels don't tell whole story
By David Barboza (The New York Times)
Updated: 2006-02-09 11:50
Foreign expertise has been critical as manufacturing supply chains become
increasingly complex, involving multiple countries that separately produce
individual components that are then shipped to China for final assembly. Since
such a system can render global trade statistics misleading; some experts say
that a more apt label would be "Assembled in China."
Because so many
different people in different places touch a particular product, other experts
say you might as well just throw away the trade figures.
"In a
globalized world, bilateral trade figures are irrelevant," said Dong Tao, an
economist at UBS. "The trade balance between the U.S. and China is as irrelevant
as the trade balance between New York and Minnesota."
China's supply of
cheap labor, coupled with a deliberately undervalued currency, helped bring
about $465 billion in foreign direct investment into China from 1995 to 2004,
making the country one of the hottest destinations in the world for foreign
capital.
In the electronics industry, relocations to China
mainland have soared. A decade ago, Taiwan controlled the computer
components market and relied on domestic manufacturing. Now, Taiwanese companies
produce 80 percent of the world's motherboards, 72 percent of all notebook
computers and 68 percent of liquid crystal display monitors. And most of the
assembly takes place in Chinese mainland.
"Everyone has moved to China,"
said Tony Yang, an executive at AOpen, a subsidiary of Acer, a
huge computer and electronics company in Taiwan. "Our suppliers, our
buyers, their main production facilities have all been relocated. Wages in
Taiwan are just too high."
Japanese and South Korean companies are also
coming to China in force. Panasonic of Japan now has 70,000 employees working in
China; Toshiba's largest information technology production site in the world is
in the Chinese coastal city of Hangzhou. And Samsung, the South Korean company,
has 23 factories, 50,000 employees and all of its notebook PC production in
China. Its last computer notebook factory in South Korea closed last
year.
The migration has left footprints in trade statistics. In 1990,
Japan was America's dominant trading partner in the Pacific, and Asia accounted
for 38 percent of all U.S. imports.
Last year, however, China was Asia's
dominant trading power. The country's trade with the United States has soared
about 1,200 percent since 1990. And yet Asia's share of imports into the United
States has held remarkably steady, at 38 percent. In other words, if production
labels simply read "Made in Asia," almost nothing changed from 1990 to 2005,
except that many goods got a lot cheaper as China took on a greater role as the
world's factory floor.
Even as that shift was taking place, most Asian
countries retained and even expanded their powerful influence in the global
supply chain, designing increasingly sophisticated models, making the
preassembly components, and carrying out the marketing and brand management. So,
while China now has an estimated $200 billion trade surplus with the United
States, it also has a $137 billion trade deficit with the rest of Asia.
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