Made in China

Went to the local E-mart a few nights ago. Standing around with my son while my wife finished the shopping we both got sucked into staring at a nearby flat-panel TV screen showing Madagascar 2. “Wow, look at that quality, and the price… but what the hell is a Haier?” The sales woman told us it was the latest model out of China, a big hit in Europe. Always wary of sales pitches I chose not to believe her spiel, assuming it was likely some no-name knock off.

This from Reuters:

Korea also faces stiff competition to hang onto its edge in sophisticated manufacturing from China itself. In electronics, Haier and Hisense have developed wide product lines while automakers from BYD to Geely have started to attract attention overseas.

I guess she was telling the truth afterall. In fact South Korea is facing increased challenges from its rising neighbor on all fronts, including the local mainstay. According to a London-based researcher, Chinese shipbuilders outstripped their South Korean rivals in orders this year. British author Simon Winchester begins his book on walking across Korea with a look at the country’s shipyards nearly twenty years ago, predicting that the sight before his eyes spells a death knell for England’s own shipping industry. I wonder if local manufacturers are now thinking the same thing when they look west.

Trade wars

It’s not all doom and gloom though. China may (or may not) move to allow its currency to appreciate against the dollar, which would be welcome news to the U.S. and columnists over at the IHT. For South Korea, analysts say a stronger yuan would mean “more demand for Korean goods on Chinese markets.” China is South Korea’s largest trading partner by the way and has been since 2003.

The bulk of that trade, however, isn’t in consumer goods but rather in materials used to produce finished exports. Per the Reuters article cited above:

Geographic proximity, cultural affinity and its own recent experience of economic development provided South Korea with a platform to reach out to China. Its companies — notably, electronics makers such as LG Electronics and Samsung — adapted their business models to send intermediate goods to China for assembly before selling the finished products abroad.

Such manufacturing inputs account for roughly half of all of Chinese imports. So as China’s export factories revved up production, South Korea and Taiwan, the two countries most integrated in their supply chain, reaped huge dividends.

China rising

Advertisements