The Second China Card

20 years ago the mantra of the day was to have a China Card.  Major western manufacturers must have a production base in China to take advantage of cheap labour, cheap land and the skilled Chinese workforce to lower production cost. This China Card gave the international manufacturers an unassailable advantage to compete in the world market. The European and American manufacturers have become uncompetitive against the Japanese, South Koreans and Taiwanese and the Chinese in producing goods for international consumption due their high labour and production cost at home. Having goods manufactured in China allowed the western manufacturers to regain the comparative advantage to sell to the world.

This old China Card no longer works like before. The new world market, the largest consumer market, is in China. 1.4 billion Chinese are moving up the economic ladder to be consumers of better quality goods and services. The growing middle class is creating a huge demand for higher end goods and services. The buying powers of the Americans and Europeans have diminished and so is the buying power of the Japanese. The big consumers are the nouveau riche Chinese in China. The current wave of China tourists buying overseas would not last for long when China is making all the goods they desired.

The new China Card is to produce in China and sell to the growing affluent Chinese market. Many western and Japanese manufacturers have the foresight to seize on this opportunity to be in China to sell to the Chinese consumers. There will be more and more joint ventures with branded high value foreign manufacturers partnering Chinese businesses to manufacture and produce for the Chinese market. Without this ticket many of the western manufacturers would go the way of the dinosaurs, uncompetitive and without a big enough market to sell to.  The Americans can try to produce at home and sell to the Americans at American prices but would not be able to export anything to the world at a competitive price.

The new China Card is the way to go to survive.  The new China Card is the passport to the world’s biggest consumer market. A new partnership to make and sell to the world’s biggest consumer market in China will mean profitability or heading towards oblivion for the manufacturers of quality consumer goods and services. This is the new challenge and new normal of the 21^st Century.