The China Deals

China has a number of deals going on with its people, the US and the rest of the World – and those deals are being severely tested in the latest economic downturn. First, domestically the deal is that the people tolerate a one-party systems with most of the decisions made at the top for 10%++ economic growth and improving social conditions (but only with 1 child per family). So far already  the past 8 years has seen 350-500 million of the total 1200-1500 million Chinese population move from low income to middle class. Also the Olympic Games were an outstanding coming out party.

Now the US-China deal is a bit more complicated. The US multinationals gains first access to markets if they come with the right deal while China becomes the cheapest cost manufacturing outlet for US corporations. Oh … and if you can’t pay for the goods in terms of balance of payments, not to worry we will hold onto US dollars for world trading purposes.  Oh .. as for IP -Intellectual Property we shall promise to do something about pirated movies, software, and technology every year and then strike up another deal with one of your major multi-nationals on the condition that WTO actions are deferred.  As for process, production, and minor product patents – cut our businesses some slack for the overzealous need to please you by copying competitors methods and means. It is only a temporary thing as we rush to reach the heights of economic development that you in the uS have had almost from your beginning. Finally, Taiwan gets to stand as is, a China Suzerain as it has been for hundreds  of years – so no need to have a war over it.

The deal with the rest of the world is similar to the US just on harder terms. If you want us to buy your goods and raw materials so you can balance your trade deficits with us, then  listen up. Because we are by far the cheapest cost producers in just about every market we care to enter – then you have to give us a deal and/or “Open the Kimono” . The latter means telling us all about the technology and processes that you want to sell us and  we are interested in. And if we should happen to overzealously copy and cross market some of that technology, its so solly and part of the Boxer Rebellion Restitution.

But now the World Economic slump has rattled the deals. Not only are those trillions of Yankee bucks becoming hard to swallow in Beijing but so is the US-induced slowdown in demand that is gutting a number of Chinese industries including toy manufacturing and  electronic supplies among others. Suddenly protests are being seen around Chinese factories for the sudden plant closings.  The deal is already strained by the loss of land and  a way of life for many people displaced by rapidly expanding factories and feeling compelled to move to cities to find their fortunes there. But the cities are sometimes quite hostile – language and ethnic clashes; water, air and other environmental calamities; and the loss of family and other social safety nets in a country with limited State subsidies.  So the deal for  GDP Growth for Domestic Social Quiet is strting to show signs of fraying.

And as for the US-China Deal – both sides are having second thoughts. As is the rest of the World. Jobs lost to the Chinese Manufaturing Machine may not be sustainable for basic economic reasons – no longer deferrable Chinese environmental costs, rapidly inflating   shipping prices, and need for product support and customization  making local manufacturing more “sustainable “. But the bottom line is that Jobs in the uS and the rest of the World cannot be freely given up to China (or India and Sotheast Asia). And so watch for the next two – four years as free trading away jobs gets tested to its limit.

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