Slowdown in China’s factories

Costs of manuafacturing in China are going up, and that’s taking a big toll on some Chinese companies. The days of cheap labor and little regulation are going away.

Now many of China’s manufacturers—including Shan Hsing—are undergoing the kind of restructuring that tore through America’s heartland a generation ago. The U.S. housing market, which generated demand for everything from Chinese-made bedroom sets to bathroom fixtures, has plummeted. A new Chinese labor law that took effect on Jan. 1 has significantly raised costs in an already tight labor market. Soaring commodity and energy prices, as well as Beijing’s cancellation of preferential policies for exporters, have hammered manufacturers. The appreciation of the Chinese currency has shrunk already razor-thin margins, pushed thousands of manufacturers to the edge of bankruptcy, and threatened China’s role as the preeminent exporter of low-priced goods.

Hsu’s new factory, it turns out, is running at just 60% of capacity, and he predicts that half of China’s lighting factories—almost all based in Guangdong—will have to close their doors this year. “Shoe factories, clothing, toys, furniture, everyone is shutting down,” he says. Hsu’s not alone in his alarm. “We spent 20 years building up our industry from nothing to one of the biggest in the world,” says Philip Cheng, chairman of Strategic Sports, which produces half the global supply of motorcycle, bicycle, and snowboarding helmets out of 17 plants in the Pearl River Delta. “Now we are dying.” Cheng says he once earned 8% margins. His margins now? Almost zero.

Comprehensive statistics on shutdowns are hard to come by. But the Federation of Hong Kong Industries predicts that 10% of an estimated 60,000 to 70,000 Hong Kong-run factories in the Pearl River Delta will close this year. In the past 12 months, 150 factories making shoes or supplying shoemakers have closed in Dongguan, says the Asia Footwear Assn. More plants will disappear as demand slows: UBS (UBS) analyst Jonathan Anderson expects overall export growth of just 5% or less for China this year.


Russ Feingold slams John Edwards

He has a point:

The one that is the most problematic is (John) Edwards, who voted for the Patriot Act, campaigns against it. Voted for No Child Left Behind, campaigns against it. Voted for the China trade deal, campaigns against it. Voted for the Iraq war … He uses my voting record exactly as his platform, even though he had the opposite voting record.

When you had the opportunity to vote a certain way in the Senate and you didn’t, and obviously there are times when you make a mistake, the notion that you sort of vote one way when you’re playing the game in Washington and another way when you’re running for president, there’s some of that going on.


Steve Forbes blasts Bush’s weak dollar policy

Steve Forbes has been saying this for years. The Bush administration’s failure to aggressively support the dollar has created serious economic problems.

The dumbest, most destructive economic policy of the Bush Administration has been its weak-dollar position–letting the dollar slide in value against the euro, the yen, the pound and gold. The repeatedly disproved theory in operation here is that cheapening your currency will improve your trade balance and that an improved trade balance makes your economy stronger and wealthier. Put aside the meaninglessness of the trade balance as a measure of economic health or sickness–the U.S., after all, has had a trade deficit with the rest of the world for 350 years out of the last 400. A weak-currency policy has disastrous economic and political consequences–most immediately, our tumultuous equity markets.

The entire article is worth reading. He even acknowledges that Clinton deserves credit for his strong-dollar policy.


Krauthammer ridicules the European strategy on Iraq

Krauthammer is pointing out the obvious – the European plan to negotiate their way out of the Iranian nuclear crisis has been a failure. He also points out that Iran has most of the leverage with their threat to cut off their oil supply if attacked or if sanctions are approved.

Unfortunately, he doesn’t offer any solutions or a clear alternative. Furthermore, he can’t bring himself to criticize the Bush administration, which has gone along with this policy even though they would have preferred a push for sanctions.

Also, Krauthammer will not address the possibility that Bush’s disastrous policies in Iraq have completely undermined any chance of taking on Iran. Krauthammer loves to cite Lybia as evidence that the Iraq war has had a positive effect on other regimes in the Middle East, yet he says nothing about the current maniac running Iran. Did our policies in Iraq have any effect on the elections that brought him to power? Again, only positive effects are open for discussion aong supporters of the war.

Krauthammer is often very persuasive, but he loses credibility by consistently offering rough analysis on the Europeans or the opponents of the war, yet he seems incapable of aiming that same critical fire at this administration.


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