China is not exactly panicking. But maybe, just maybe, China is beginning to worry a tiny bit about its well-managed economy losing its grip on a thus far dependable throng of overseas investors.
New data released by China’s Ministry of Commerce this week shows that in the first half of this year, direct investment from the United States to China dropped by 3.2 percent over the same period last year, to $1.63 billion.
Foreign direct investment (FDI) into China (not just from the United States, but from all over the world) fell for the second consecutive month in July. This brought the total FDI inflow for the first seven months of the year to $66.67 billion, down 3.6 percent year on the year.
Blame Obamafor bringing back manufacturing jobs to the United States
The news [about declining inward investments in China] was apparently a story big enough to compel China’s commerce ministry spokesman Shen Danyang to talk to theChina Daily.
While downplaying the ministry’s own data, Shen blamed the dwindling investment inflows on “the United States’ strategy of bringing manufacturing back home,” in addition to “the euro zone's ongoing debt crisis, China's strained land supplies and rising labor costs.”
In case this alarm wasn’t loud enough to convince the rest of the world, the Chinese government also made available Zhang Xiangchen, director of the Department of Policy Research at the Ministry of Commerce, for a separate interview with the China Daily. In that interview, Zhang said, "China is not worried about the massive transfer of factories by multinational companies to neighboring countries as the quality of foreign investment will improve.”
Well, one should always worry, when a government official says that he is NOT worried about something. Also, note the key phrase in his statement above: “neighboring countries.”
Foxconn isn’t alone. A few other multinationals are also moving production from China to low-cost countries in Southeast Asia. China Daily reported that Adidas said last month it will shut down the company's only fully-owned apparel factory in Suzhou, Jiangsu province, which employs 160 workers, at the end of October. This comes after Nike closed its only shoe factory in China, also in Suzhou, in 2009.
Although Zhang cautioned that the momentum [of declining investment in China] will probably continue in the following months, he held the view that the impact would be “limited” in the short term. He insisted that any fears are unfounded.
In explaining decline of U.S. investment in China, Zhang, too, focused on the 'Select USA' program promoted by the Obama administration. He said the program sets up a national promotion agency to attract more foreign investment, especially from China.
don't forget the polution Chinese are suffering. Are Americans willing to take the same job at the same pay and suffer from the polution? If not, how can jobs come back?
Some people work for a better life, but some work just to survive. I like to see the jobs go to the second group of people, no matter they are Asian, Americans or Africans...
Only with the willingness of personal sacrifice, then can we talk about human rights
It is surprising that China didn't expect this. They shouldn't worry. Once the US economy is back, the investments will return. With the economy the way it is now, how can they expect to continue to get the investments of the past?
At least 4 things are missing from your analysis, IMO:
1. The US is not one monolithic thought. It is multiple competing interests.
2. Companies want to be competitive in the short term, but also want a vibrant economy where they can sell their products.
3. People want low cost products but also want employment prospects.
4. As much as China is a "tango partner" for availability of low cost products to the US and the west in general, it is not a "tango partner" for the employment prospects of a large part of the work force, in US.
In other words, a mixed bag. Because as difficult as it is to accommodate major changes in the economy, like the move from agrarian to industrial, it's even MORE difficult when the change involves entire sectors of the economy moving offshore.
Consequently, investment in China from the US cannot be expected to increase or even stay steady, if the US economy struggles. This has nothing to do with campaign slogans. And Americans from all political affiliations are hardly comfortable with the idea that so much manufacturing has moved offshore.
The same I'm sure will be happening to China, if this move of manufacturing to Cambodia, Vietnam, and Indonesia comes to pass. It will be seen as a mixed bag, not universally celebrated. Only as wages and prices globally begin to even out will this state of affairs become a real "partnership."
Reduction of foreign investments to China may bring out concerns. However, the biggest concerns that China has is the transition of workforce from labor intensive to knowledge based. Every country goes through similar development cycle. Simple manufacturing jobs bring cash to the country. As the economic blooms, wage rises. The labor force will shift to favor skill labors. As the economy thrives, knowledge becomes the main driver to increase productivity so as to maintain the cost to productivity ratio. Globalization and technology advancement has shortened the cycle. Most industrialized countries have experiences ten of years of economic thriving through production and the high demand of talents more than the demand of labor start like 15-20 years ago. China inevitably move to knowledge based economy after enjoying roughly 30 years of production based economy.
Just my 2 cents.
Well, you pretty confirmed what I commented. the americian people want to buy cheap stuff and and for that China is simply a tango partner for the US. At no point did I deny about people losing their jobs? So what point did I miss again?
One of the insteresting aspects of working in today's engineering world, is the level of interdisciplinary cooperation required to produce a design. The design effort tends now to sprawl across the world. Engineers work with manufacturers overseas. And the products being created are truly compelling. One can only wonder, as more countries acquire their "design legs", what incredible products might be produced ten or twenty years from now.
"It is ridiculous to insinuate that Chinese took away US manufacturing and design jobs. It is this kind of nothing-is-our-fault thinking that promotes misunderstanding between countires. Think about who decided to move the business abroad years ago - China just took advantage of that and accomodated what the US wanted"
Wow, you really are missing it, I'm afraid.
There is no such thing as "what the US wanted." US companies, in order to lower their prices and get a competitive advantge, moved production AND DESIGN offshore. Certainly true for consumer electronics, like TVs and audio. But also for mundane stuff, like plumbing supplies and Christmas trees!
This moved many jobs away, and this has played a part in damping economic growth in the US and other western countries. Not just the manufacturing jobs, but also all the small support jobs around the industrial centers.
It is ridiculous to pretend it isn't so.
Companies tend to think short term gains. Americans and other westerners also like to buy products at the lowest price.
But this doesn't mean that people in the West are blind to what has happened, right? As the economies go flat or contract, the Chinese cannot help but notice reduced investment in China, from the west. Why would anyone think that the short-term goals of individual companies are all that "the US" wants? I'm sure that the US factory worker who can't find another job wants something quite different from companies moving jobs to China!!
China has played the game so well that even if the investors do not want its difficult for them to go anywhere atleast it will not be that easy.But its good for the world business if there are other options open.
It is ridiculous to insinuate that Chinese took away US manufacturing and design jobs. It is this kind of nothing-is-our-fault thinking that promotes misunderstanding between countires. Think about who decided to move the business abroad years ago - China just took advantage of that and accomodated what the US wanted. It is a capitalist system that everybody decides to play (not a socialist one) and so everybody assumes the consequences. Good for Obama for wanting to bring back those jobs. And China will react accordingly, whatever it takes.
That's what I had gathered from your article, Junko. And that's why I think the Chinese are missing the bigger picture.
Blaming election slogans is not at all the whole story. Better look at the entire US economy to see why US investment in China isn't growing.
Everyone in the US is asking why jobs aren't on the rebound yet (and I'm convinced government-created tax uncertainty has a whole lot to do with it, not to mention a host of anti-business rhetoric). So the Chinese should wonder why investment from the US to China should NOT also be affected negatively.
From where I sit, the hemmorhaging of US jobs to China is precisely part of the problem. Eventually, it caught up. Action - reaction. It's probably not a zero-sum game, but it's pretty clear that the big gains in offshoring to China have definitely dampened growth in the western economies. The big equalizer, globalization.
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