There has been great condemnation recently because China has been selling its goods on the world market at prices below what other countries, especially the U.S., can produce. It has been called exporting deflation.
The major reason for these extremely low prices has been their labor costs which I am told are about $100 per month for ordinary factory workers. Even factories in Mexico are being closed and shipped to China because of the labor differential. These extremes in production costs are literally putting many, many companies out of business. When you look at the labels in almost any store you will note the product is made in some Asian country. As far as you, the consumer, is concerned you are buying a product at a good value. Political considerations aside there is no question this has been beneficial to retail buyers.
Is there any reason China should act otherwise? No, they are acting like any businessman. Yes, I realize it is a country, but countries do the same as businesses just on a larger scale.
Suppose you and I each own a hamburger franchise. I have a McDonalds and you have a Berger King across the street. We each sell our hamburgers for 99 cents. The competition is equal. You also own a huge cattle ranch and slaughter house/packing plant as well as a large bakery and you want to increase your retail food business so you pass along the savings you make from the meat production and bakery to the burger stand. You reduce the price to 75 cents and now make a profit of 20 cents per burger whereas I only make 10 cents and must sell it for 99 cents. When someone wants a hamburger where do you think they will go?
I can scream all I want about how unfair this is, but so what. He is not selling at a loss and even if I lower my price I can't go low enough to make a profit. I eventually will lose all my customers to him and will go out of business. Is that fair? Sorry, but fair doesn't count. That's business.
China is selling hamburgers (whatever) cheap, but they are of equal quality. Consumers want both quality and price (value) and don't care where it comes from. Countries are complaining that they are selling "too cheap". No they are not because they are making a reasonable profit. One of their production tools (cheap labor) is so good that businesses from all over the world are moving there to take advantage of it. If they don't they will be out of business. You can't blame them.
Over the next 10 to 20 years China can become the world's leading country because of their economic development. They don't have the overhead (translation - central government, entitlement programs, lawyers, labor unions, etc.) we do so they will be able to keep costs down. Eventually (many years) their central government will slowly evolve toward giving more to their people, but it is going to be decades. In the meantime, learn to speak Chinese.
Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.
Copyright 2005
http://www.mutualfundmagic.com; 1-888-345-7870
no-contract cleaning service Des Plaines ..You probably have been told that options are risky. Even... Read More
One of the greatest challenges of investing in stocks is... Read More
Two weeks ago I wrote about what the Securities and... Read More
What a great statement!I just heard someone use it in... Read More
The debate rages all over Eastern and Central Europe, in... Read More
There are major differences between trading stocks and trading futures.... Read More
What account size do I need?How much money can I... Read More
If you are a baby boomer, time is not on... Read More
Have you bought any mutual funds this year or late... Read More
Options trading can increase the profits you make when trading... Read More
The Surgeon General of the United States says that smoking... Read More
A recent cartoon in my daily newspaper showed two guys... Read More
With the internet such a huge part of our daily... Read More
Checked your 401K lately? Going back to about a year... Read More
The higher the market goes the more confusing are the... Read More
If you have not back tested your trading system, you... Read More
Recently I was invited to appear on a live CNNfn... Read More
To become a successful trader you must have some kind... Read More
You read and hear a lot about hedge funds. Unfortunately,... Read More
Wall Street's watchword has always been diversification, but what does... Read More
First let's see what protectionism is. According to Mr. Webster... Read More
If you are fed up with early redemption charges and... Read More
Index Fund Trading can be one of the most profitable...or... Read More
It is finally catching up with them. The brokerage companies... Read More
Do you have a financial planner? Does one of your... Read More
bathroom cleaning service Lake Forest ..Reach in your pocket and take out that big roll... Read More
Sometime in the third quarter of 1997, someone told me... Read More
The stock market has been going up for more than... Read More
Several times each month I am solicited by various market... Read More
In 1960 an engineer working for a watch company in... Read More
So you're started trading, you bought some positions with your... Read More
As the man said, "I've got some good news and... Read More
As GuruFocus updates the stock buys and sells of gurus,... Read More
Disclaimer: Please note that I do not necessarily purchase, own,... Read More
To begin, you might look at playing the stock market... Read More
Dollar cost averaging is one of the most popular ideas... Read More
A PEG ratio cannot be used alone but is a... Read More
With over 6,000 mutual funds available, it may be tempting... Read More
The single most expensive stock market trades are those made... Read More
If you're a normal human being, your need to feel... Read More
Every Wall Street analyst, financial planner and broker will tell... Read More
The Winter Games for the Olympics are coming up soon... Read More
It seems that every day I turn on the TV... Read More
I am sure that if you have a brokerage account... Read More
Every stock market investor faces one primal enemy. An enemy... Read More
The ABC's of Stock Trading SuccessStock trading success...why is it... Read More
The higher the market goes the more confusing are the... Read More
Before we get into all the good news out there,... Read More
With the internet such a huge part of our daily... Read More
What is leverage?Here is a definition of leverage from an... Read More
Stocks & Mutual Fund |