Letter to the Editor: China's Economic Impact
Beginning in the early 1980s, the vision of a vast consumer market lured transnational corporations to China. However, instead of becoming a huge market for consumer goods, China is "becoming the world's factory floor," notes the October 17 Far Eastern Economic Review. "China's manufacturing prowess is pushing down prices on a growing range of industrial, consumer and even agricultural products that it sells around the world."
Because it has "an almost endless supply of low-priced labor that not only allows companies to control costs, but often to cut them dramatically," China is "becoming an increasingly powerful global deflationary force." This produces an abundance of cheap goods. But "the flood of cheap Chinese imports has translated into some lost jobs for American workers," notes the Review.
Nearly half of all Chinese-exported goods are manufactured by western companies such as Motorola, G.E., General Motors, and Boeing all of whom produce "dual-use" technologies benefiting Beijing's military. "To continue doing business in China, the American company is required not only to transfer advanced manufacturing technology to China but also to train a Chinese workforce, thereby protecting profits in the short term but helping to produce an eventual competitor at the same time," observe China analysts Richard Bernstein and Ross H. Munro.