Book Excerpts: Getting Over China

[Omaha Steve]

http://www.forbes.com/opinions/2008/03/29/book-excerpts-china-oped-cx_ah_0331china.html



An excerpt from The China Price: The True Cost of Chinese Competitive Advantage by Alexandra Harney ($26, Penguin Press, 2008).

Sam slides behind the wheel of his new black Honda and noses the car into Friday morning traffic. It's a hot, sunny June morning in Changsha, capital of central Hunan province, and everything seems to be falling into place.

Beside him sits his wife Jasmine, eight months pregnant and radiant in a yellow dress. High school sweethearts, they married at 21. Now, at 23, they're about to start a family in a brand new gated community. Sam, whose name, like those of other members of his family, has been changed, is looking forward to making use of the development's two swimming pools and basketball court. In a few years, they plan to build a house in the mountains where they can entertain family and friends on the weekends.

The Honda heads out of town into the verdant countryside toward Jasmine's father's towel factory. Towels, a key Hunan export, have been the family's mainstay for nearly two decades. Sam married into the job of overseeing the plant's $5 million in annual sales.

The road narrows and Sam slows to accommodate farmers swaying on bicycles. On either side are rice paddies and family farm plots. That's where the first sign of changes ahead appears. Trees.

Several years ago, farmers on the outskirts of Changsha realized they could make good money growing trees. They planted family plots in Hunan's fertile soil and hung signs on trees near the road advertising their cellphone numbers. Soon enough, the farmers who worked at Sam's factory were demanding higher wages, because they could make better money from trees.

The factory, which relies mostly on local labor, had no choice but to capitulate. "Salaries are going up and up," Sam sighs from behind the wheel. The labor market has tightened, too, as other factories have opened in the area. The government is hiking the minimum wage in Changsha. Sam figures he has three, maybe five more years before his factory loses its competitive edge.

This is where the next boom in Chinese manufacturing is supposed to take place. Conventional wisdom holds that rising costs of everything from labor to land on the coasts are driving factories in labor-intensive consumer industries deep into the country's heartland, to provinces like Hunan, in pursuit of lower prices. But in China's fast-forward economy, investors are finding things aren't as cheap or plentiful as they used to be. And the workers aren't pushovers, either.

FULL 2 page article at link.

Looks very interesting.