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In a largely unnoticed report on the developments in the textile industry, Stitched Up, the international organization of trade union ICFTU addresses the rising competition from China and its effect on the rest of the world. Main argument: it is not fair. One of the reasons for the report is the upcoming WTO-meeting in Hong Kong. The International Confederation of Free Trade Unions (ICFTU) cooperated with the major association of textile employers to compose the report, that repeats the problems the end of the textile quota have mainly caused for other developing countries, who cannot compete with the Chinese prices that are 10 to 50 percent lower on average. The report largely blames poorer labor conditions and compensation - compared to other low-cost countries - for the lower prices, but fails to come with a convincing proof. The ICFTU has all but ignored China since 1989 and mainly calls upon the larger brands to only deal with companies who have decent labor conditions. The report fails to address fast changing realities in China and offers no alternatives over the obligatory calls for free trade unions. While real trade unions are still banned in China, non-governmental organizations have increased activities over de past years. On a macro-level the new Chinese government is addressing the low wages at the country side and pushes towards improvements that would have been unthinkable in the 1990s and the beginning of the 21th century. Books on textile

Henry Ford

(Later also at Chinabiz and the China Herald)

Brussels - I have used the car market in China always as a kind of barometer. Also because of its sheer size what happened on the car manufacturing market had a profound influence on the economy as a whole, maybe only beaten by the real estate market.

But the real estate markets have been too jumpy to really work as a solid barometer for China’s economy. A new tax, a crackdown on corruption, another tale about a bubble and the prices would jump in anticipation of what might happen. Compared to the real estate market the automotive market was a heaven of stability.

It was a kind of comforting to see all those companies throwing in massive investments into the Chinese car market, even though it would go against the common sense. While I compared the car markers with lemmings, they kept on pouring billions of investments into a market that would be only a fraction of their dreamed revenue. Did I expect them to listen to me? Of course not, it would be really scary when people would listen to me.

And many of my friends did not. They quit their jobs to join the car industry, the manufacturers, their suppliers, their ad companies and the multitude of government departments that got a piece of the action, including the feared traffic police.

Economy is all about confidence, I learned at school and saw it confirmed in China. Reality can be defied, as long as the trust is there.

So, when Volkswagen China decided to slash their production capacity to half, only a poor 900,000 cars per year, it was very sure that dramatic changes were taking place. Even when it would only be seen as a symbolic gesture – most production capacity is anyway not used in China – it is bound to have a huge effect.

When car manufacturers give up on their China dream, what is left for the poor people down the food chain that hope for a few smaller pieces of the action that would drop from their tables?

It was comparable to the loss of confidence in the second half of the 1990s, after foreign companies had been building up massive overcapacity in the first half of the 1990s.

Will the other car manufactures stick to their insane investments plans? I doubts it, after Volkswagen has been the first to acknowledge they were on a crash course.

There is some good news too in the automotive industry in China, like Delphi, the largest car part producer in the US, who will shift more production from the US to China to cut costs. But is that going to help to sell more cars? First we would need visionaries like Henry Ford, who started to pay his workers enough so they could afford to actually buy a Ford.

Now that would be a nice new dream: raising the Chinese wages to such a level, most people could actually buy a car. Apart from China and the world becoming uninhabitable, there would not really be anything against such a proposal, is there? Ford did not mind about those little details, as long as he could sell cars.

Fons Tuinstra

Yesterday I mentioned I needed an RSS-feed for my new weblog on the Wage Indicator, today I have one!. When you want to subscribe, please find it here. Do not expect too much in the coming months apart from many technicalities, as we are still discussing how to get the whole thing done. But that might also be interesting enough for people to follow.

Residing for a few days at the home of the international organizer of the Wage Indicator, Paulien Osse, to discuss strategies for the China leg of this project, so not that much time to spend on blogging.
Last week trying to figure out whether we would be able to join a new fund installed by the European Commission for social affairs and labor issues. It does not seem impossible, discussions with enthusiastic officials in both Brussels and Beijing showed, but certainly something for the long haul.
Pretty impressed by the progress the wage indicator is making. A new technology for the questionnaire has been introduced that will make the usage much more solid and will allow the project to engage itself in dealing with commercial research.
Apart from the nine European projects, launches in India, Korea and a few other countries are becoming feasible and we concluded that China should be part of that development. Funding is still an important issue, because - unlike other countries - China has huge internal differences and would need about eight regional projects, in stead of one (like most countries) or two (like Germany). One option to limit initiatial starting costs could be to start off with only Beijing, Shanghai and Guangdong. Later we can include the rest of the country.
Again: otherwise very much impressed since the progress the project made since my previous visit.
Getting now material together to make an action plan for our Chinese wage indicator. Have started a small new blog as has Paulien. Not yet an rss-feed and other things, certainly little content, but that will come.

The news is not shocking but telling. CRS Asia noted in a Chinese paper that the ongoing shortage of migrant workers in Guangdong and Fujian provinces over the past two years, that was also noted in Harbin, has now expanded to southern Guangxi, especially the 1.8 million people counting Heng county.
Also here, the rising farmers' income was noted as a reason.