Chinese Underpinnings Shakey?

China's proposed take-over of Unocal unmasked the Beijing regime's global strategy: Sell cheap, buy strategic assets (treasury notes, military components, oil and resources) and put our economy and military capabilities at risk.

But will it work? China is depending on capitalism to fuel its communist ambitions and that just might be the rub. In a dynamic capitalistic world, how long will China be able to be the low-cost supplier and continue to generate massive cashflow? And if they're not the low-cost supplier, will they be able to fuel their ambitions, or will they go into an economic slow-fall, as the Japanese did?

What got me thinking about this was an article in Car & Driver about a factory in China that makes about 1 million high quality model cars a year. (It's not on-line yet). It said:

And go [to work at other factories] the workers will, if the pay and living conditions are better at another company. China's rapid industrialization has strained even its own produgious supply of human resources.... [The company's] pay, housing and food costs have increased by more than one-third over the past decade, from about $60 per month per worker to $90 today, and [the company] is in competition with other factories to offer good amenities.

Even at $90 a month, China has a lot of economic cushion, but expect inflationary pressure to increase, not decrease, and don't expect the Chinese government to figure out the complexities of managing a capitalist/communist economy easily, once the pressure hits.

My father started his import/export company in Japan, exporting cheap metal goods to the U.S. Before long, Japan became too costly and he moved on to Korea and Taiwan. Now Korea and Taiwan have lost out to China. And so it goes. There are plenty of places poised to undersell China ... the entire continent of Africa comes to mind ... and WalMart will never stop pushing for lower costs.