(Excerpt) China is becoming the workplace of the world, so we are increasingly
told. Jeffrey Garten, dean of the Yale School of Management, writes,
"Will China's importance to global manufacturing soon resemble Saudi
Arabia's position in world oil markets?" And the world economy might
"soon become dangerously vulnerable to a major supply disruption [in
China] caused by war, terrorism, social unrest, or a natural disaster"
(Business Week, June 17, 2002).
Its growth in manufacturing is impressive. Manufactured goods
exports rose during the 1990s at a 15 percent annual rate to about $220
billion in 2000. On one estimate, China now makes 50 percent of the
world's telephones, 17 percent of refrigerators, 41 percent of video
monitors, 23 percent of washing machines, 30 percent of air
conditioners, and 30 percent of color TVs. Many companies in the United
States, Japan, Taiwan and elsewhere are moving operations there. Jobs
are shrinking in Mexico's factories as work shifts to China. The
building space of foreign contract manufacturers grew from 1.6 million
square feet in June 1999 to 5 million square feet two years later.
The causes are China's opening to the world; its abundant supply of
cheap, competent labor (with wage rates 5 percent of those in the
United States or Japan and one-third of Mexico's--and no trade unions);
a high savings/capital formation rate; and an influx of direct
investment that brings technology with it. Moreover, there are still
around 300 million workers in low-income, primary producing sectors,
largely agricultural, that is a reserve pool of labor for industry. ...