Op/Ed Commentary: Chris Devonshire-Ellis
Jan. 8 – I have spent two of the last three months in the United States, mostly on business trips. Taking in New York (twice), Chicago, Miami, Austin and San Francisco (also twice), several things are clear. One is that the U.S. recession is not across the board, as in certain areas, especially in added value such as the tech sector, U.S. businesses are booming. The recession has not affected all aspects of the U.S. economy.
What has been telling, however, is the difference in perception over the need for America to continue to purchase cheap imported goods. Several times, and in different cities, a newer picture began to emerge that has major implications for exports to the United States. On numerous occasions I was told “American households are stuffed full of Chinese products. We simply can’t buy anymore.” While that would appear a generalization, it is an attitude that is worth examining.
China has been selling products to the United States in large quantities for 20 years now, and if many of these are classed as one time only buys, then the steam may have run out for many of China’s cheap exports. As my father used to say, perhaps in the mistaken belief I would end up a factory owner, “Always manufacture breakable items such as China mugs. If you manufacture unbreakable ones, eventually you’ll go broke. Everyone will have one and your market will have disappeared.” My father worked for the BBC for his career after being released from the Royal Navy following World War II, so his business acumen was not forged on the shop floor. However, his words do ring true.
It is also apparently true, 18 months into the global downturn, that the first decade of this century was marked by conspicuous consumption of cheap goods. Driven mainly by China, and absorbed globally, the consumption boom rode the wave of several new and popular technologies – digitization changing the way we operate – and by the continuing growth of China’s own massive population. Yet in many products and industries, the saturation point appears to have been reached. In short, has a manufacturing bubble developed and is China in danger of producing huge quantities of goods and products that they will be unable to sell?
To explore this further, let’s take a look as some of China’s runaway spectacular industries. Are they sustainable, or is the global procurement cupboard stuffed to overflowing?
The city of Foshan, in Guangdong Province, is the world’s camera manufacturing base churning out some 15 million cameras last year, or about 15 percent of the world’s total. Yet looking around, many of my friends possess more than one. Sure, cameras need to be updated, and they break. But in the rush to go digital – China has ridden the digital camera wave in spectacular fashion – is there much more of a new consumer market left now that everyone appears to have one? Has the market changed from servicing a totally new product (digital replacing film) to now being purely one of upgrades and replacements? If so, demand will drop.
China manufactures and sells about 10 billion pairs of shoes each year, mainly from Guangdong Province. That is one and a half pairs for everyone on the planet, each year. Now that Homo sapiens as a species are totally shod, is growth in this industry, apart from fashion and replacements, really possible or indeed sustainable? The current global population growth rate is 1.17 percent, according to the World Bank.
There are just over 2 billion Christians globally. However, manufacturers based mainly in South China have exported 500 million artificial trees in the last ten years, one for every four Christians, who tend to use them for family use over several years, rather than annually, per individual. Maybe time to convert?
Shenzhen manufactures 90 percent of the global demand for computer keyboards, mouses and screens sold worldwide. Suzhou is the world center for manufacturing hard drives. Now computers are again part of most people’s daily lives and are apparently everywhere. However, a search on WikiAnswers reveals otherwise, and I quote: “Computer ownership is now at about 4-5 percent of the world’s population. However with many social projects putting computers in villages in developing countries, between 12-14 percent of the world’s population have access to a computer. Approx 3-5 percent of the world’s population have internet access.” This would suggest high-tech industries still have a lot of market penetration and growth potential on a massive scale. However, the web site also warns: “To put this into context only about 25 percent of the world’s population sleep in their own bed at night and only about 30 percent of the world’s population are rich enough to have a bank account.”
Yangzhou, a major world center for manufacturing toothbrushes, produces 80 percent of China’s domestic needs and 35 per cent of global consumption annually. However, with wear and tear, and an increase globally in hygiene levels and dental care, toothbrush manufacturing is likely to remain a bright industry.
Xiamen exports 120 million pairs of sunglasses each year. However, now they are showing up in cheap piles on every street corner globally, from Fifth Avenue in New York to street corners in Lagos. Just how many pairs of sunglasses do we need? Add the unsold world stockpiles together and that would appear to be an awful lot of poor quality shades that need to be shifted. Once a product is sold from plastic mats on dirt floors, you can be pretty sure the market saturation point has been reached.
Dongguan is the world’s largest manufacturer of microwave ovens. But they’re too expensive for much of the world, which still relies on burnable fuel.
Seventy percent of the world’s supply of costume (cheap) jewelry is in manufactured in Shandong Province. Do the more conservative consumer years of the centuries second decade mean a boom for cheap jewelry or is the world full of more plastic bracelets and cut glass diamante than we can possibly need?
These are just a handful of examples. Readers are invited to suggest other industries which may or may not have the global potential for growth the past decade has seen. The results will be compiled, together with your name as a credit, in a “Sustainable China Industry” report we will issue at the end of the month. Your comments are welcome and may be placed below:
Note: Manufacturing statistics related to China were sourced from the China Briefing series of Regional Business Guides. To read more about these books please visit our bookstore.