The Contrived China Advantage – Continued From Prior Post

Consider this: let’s say China’s price advantage in so many categories of goods is aided by their Central Bank, keeping their currency weak. American factories simply can’t compete, on price anyway, more and more American factories are shuttering their facilities, China continues to gain market share in all these areas where their price is superior and American factories can’t compete and you have a recipe for a global monopoly going to the Chinese. Once the monopoly is established and there isn’t any significant competition, what can the Chinese do? Anything they want! They are the victors, and to the victors go the spoils!

Another way of looking at this though is, while so many Americans are losing their source of income from the lost factory, service and other jobs subject to the foreign competition, our ability to purchase goods and services, domestic or foreign is compromised. We are losing our standard of living, the ability to buy the goods and services we want and need. So again, as I said in my original post What’s happening to America, and what do we need to experience a resurgence of our country ?, “Has anyone, namely our politicians and corporate leaders really weighed the true cost of outsourcing abroad though?”

In answer to this I suspect our corporate leaders turn a blind eye to the greater good of the American public, and instead keep their eye on the prize of profits. After all, increasingly, executive bonuses and stock options are tied to the performance of the company. The fat cats pad their pockets, and what do they care of the increasing disparity between them and, not only the other employees in the company, but main stream America. Wall Street can be partly to blame as well, with analysts’ orientation toward increasing profitability in the short run, often at the sacrifice of the big picture – and corporate America heeds the dinner bell.

Apparently, our political leaders have taken notice too. The George W. Bush and Barack Obama administrations have both had discussions with China about exchange rate issues and fair trade. China has repeatedly denied manipulating its currency and repeatedly refutes that their yuan is undervalued. Much of China’s industrial might is from state-owned enterprises (SOEs) that are protected and subsidized by the Chinese Government.  About 40% of the value of all goods and services produced by China on their own soil (GDP) is attributable to these SOEs. Essentially when a U.S. company is competing in China with a Chinese company that is an SOE, for all intents and purposes, it is competing  with the Chinese state that calls all the shots, and who do you suspect emerges victorious on Chinese soil – not our companies. China makes sure of that !

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