REPORT FROM CHINA
I have just returned from a week in Hong Kong and parts of Mainland China.
I cannot speak Mandarin fluently yet, but I am learning, albeit slowly. Mandarin is not difficult, in fact the grammar is quite simple in comparison to German or Russian. The basic problem is accumulating a large number of small words and small defining words and then pronouncing then correctly. The pronunciation requires an environment where everyone speaks Mandarin.
This is not possible in the USA unless you are part of a Chinese family.
A NEW CHINA
What I saw in China shocked me!
I had the false preconception that China was a state controlled country where every entrepreneur had to got to a local government official, bribe him, and then get on with business.
This is partly right, but mostly wrong.
The Chinese people are too intelligent for that type of friction in their economy. As a matter of fact, Americans and Europeans and all their former colonies are more restricted by governmental red tape than the Chinese economy.
It is true that the governmental officials require a small bribe to sign papers. But that does not slow Chinese businessmen and Chinese businesswomen, (The Chinese are NOT sexist. Women are in business everywhere) and the process of business goes on everywhere.
The government plays a positive role in society. The government maintains order and lets the people do the rest.
The people have only one goal in mind: make money. Making money in China means working hard, and doing whatever it takes to produce and sell a product.
For example, all the refuse that Westerners throw into landfills are recycled in China into New Products!
Old shirts and old clothing are picked apart for their cotton and then refined and turned into new shirts and new clothing. The new clothing is generally exported to countries across the world.
The labor costs for this meticulous work are very small in Western terms, but with one and a half billion people there are always workers available.
The workers are treated well, given food and lodging and they are happy to have the work. Most of the workers have come from the countryside where they had eked out an existence on a small plot of land.
The products made by these small factories encompass the universe of products sold in the rest of the world.
I saw copies of religious articles that would be sold in the Muslim countries of the Middle East. I saw items with labels in Spanish to be
sold in Latin America and to the Latinos in the USA.
Everything imaginable that was normally found in other parts of the world were meticulously copied, produced and packed for shipment abroad. This included Christmas trinkets, with sayings in German, bound for Germany, Austria and Switzerland.
Of course, in the large factories they are already producing cars, which are today being bought by the Chinese, but in the future will compete with GM, Ford, BMW and Toyota and Honda.
The cost of the Chinese cars will be much lower than other cars, because the labor costs, for design, manufacture and parts will always be lower than such costs in the West or Japan.
CHINESE AGRICULTURE
The Chinese know that people across the world have to eat. They have developed specialized farms, specialized factories for growing mushrooms, and an incredible number of aquaculture sites for raising fish, shrimp and other sea-foods.
I saw a site for raising Pompano, a fish found in the southern waters of the U.S. and Central America. This fish is beloved by seafood lovers because of its delicate taste and edible skin. It is best served steamed.
The Chinese owners raise these fish to a size that is considered proper for a family of four. They are then flash frozen and shipped to Asian supermarkets across the world. I have tasted them in restaurants and there is no difference in taste from their wild cousins.
SELLING CHINESE PRODUCTS
After seeing this bee hive of manufacturing and agriculture, I asked my friend: “How do these tiny companies sell their products abroad?”
I was informed that first the smallest companies sold to a wholesaler in China. Then, the wholesaler sold to a marketing agent located abroad. The marketing agent was either a relative or a known Chinese friend.
“There is a network of Chinese marketing agents all over the world. They are quiet and inconspicuous, but they know all the importing laws of every country.”
It occurred to me that there are approximately a half billion Chinese outside of China! This Chinese Diaspora (Chinese people living outside of China) operates businesses of every sort in every country on the globe.
There is no country that does not have a Chinese restaurant. The family that operates this restaurant has children or relatives which also sell goods made in China.
The Internet has become the platform for locating agents all over the world.
Because of the vast Diaspora and the constant use of the Internet and Skype, Chinese manufacturers can locate friends or relatives anywhere.
The key to this international sales force is to keep prices low and competitive. There are few companies in the world who can compete with the Chinese in terms of quality of goods and low prices.
BORROWING MONEY
Chinese entrepreneurs do not use the State banking system.
They borrow money for their businesses from private lenders who charge very high interest rates. There is no collateral and no paper contracts! A loan is made on the basis of the reputation of the borrower and the willingness of the lender to take a risk. The loan is generally sealed with a cup of tea.
State controlled banks are used for major corporations and for home buying. These banks require enormous paper work, like American and European banks. They are considered worthless be the small companies, who generally have no license or paperwork.
COMPARISON WITH THE WEST
Because the West shunted all its manufacturing facilities and agriculture to China and other countries with cheap labor, it had to do something to keep its workers working.
In the USA it started to build houses and we all recall the housing boom of the late 20th century.
In Europe, governments increased their public payrolls and retired people early.
Both of these gambits required large quantities of money, and we saw Western governments borrowing trillions of dollars and Euros. Now, the charade is over.
The West is facing trillions in debt, and they have no method to make this infinite amount of money. Wherever they turn, they will face the two billion Chinese who are working hard and keeping all their profits.
There is only a finite quantity of material for making goods, for farming and for energy. Little by little, those materials are being absorbed by the Chinese people.
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