THE CHINA SYNDROME

Posted in Rants on March 23rd, 2011 by Ed

Sometimes I am reminded that I've been doing this for a long, long time. Like when I remember an old post on an obscure subject, search it out, and discover that it's from 2005.

Yes, many years ago I wrote about why I was not impressed by the dire predictions from right-wing thinkers about the military growth of China. That old post was mostly an excuse to show a funny video of a shitty Chinese SUV being crash tested and crumpling like a Dixie cup in a 40 mph collision. While no one can question the manufacturing capacity of China, the nation's business and economic culture has yet to show that it can innovate or build things that aren't disposable.

While we don't hear much these days about the Chinese military taking over the world (with knockoffs of 1980s Soviet designs) we do spend quite a bit of time worrying that they will conquer America and the rest of the Western world economically. We constantly fear that they will take not only manual labor but white collar jobs as more Chinese students receive educations identical to their American, Japanese, and European counterparts. Alarmingly, Chinese industry is starting to make inroads into high-tech areas of manufacturing – aerospace, precision electronics, etc. – previously thought to be off limits. Most recently, the media has run a number of alarming "Oh no, the Chinamen are a-comin'!" stories about Chinese automaker BYD, which is set to become the first Chinese car company to go on sale in the U.S. next year with its rumored low cost, long range (~150 miles) electric car.

Here's the problem. Even when they wade into high-end manufacturing, Chinese business culture seems to be built on three basic principles:

1. Steal old designs from Western manufacturers
2. Reverse engineer it down to the last screw, and make a cheap, cut-rate version of every component
3. Assemble a final product without the slightest regard for safety and durability

What comes next is the real golden rule of Chinese business strategy: It doesn't matter how much it sucks because someone will buy it. Someone will always buy it if it's cheap enough. Is that someone the American or European consumer? That's pretty doubtful. It turns out (thanks again, Wikileaks!) that the Warren Buffett-backed BYD isn't much different from other Chinese automakers without American capitalist patrons. The EV design complies with "Chinese intellectual property law" – which, if you know anything about Chinese industry, is about the funniest phrase imaginable. Can it beat a lawsuit in a U.S. courtroom? Oh, and apparently the doors fall off if you slam them too hard.

European buyers have already had a brief experience with Chinese automaker Brilliance Automotive, whose death traps were sold between 2008 and 2010 on the continent. Western consumers will buy a Chinese t-shirt, Chinese plastic crap from Wal-Mart, and even Chinese consumer electronics…because all of those products, even a relatively expensive TV, are considered essentially disposable in our society. If a TV works for 3 years and then craps out, we just buy another one. A car is a major purchase for the non-wealthy (and the wealthy sure as hell aren't going to buy a Chinese compact car) and it's hard to see the market, even if prices are ridiculously low, for cars that work for a year and then give up the ghost.

Then again, that worked for GM, Ford, and Chrysler for 40 years. *rimshot*

Rather than end on that hugely hilarious joke, lest we get carried away mocking the limits of China's ability to conquer the U.S. economically we should note well what the Koreans have done in a very short timeframe. Ten years ago Korean cars – Hyundai, Kia, Daewoo, etc. – were the crap stuck to the bottom of the shoe of the auto industry. In a very, very short amount of time those manufacturers have figured out how to make great products and first Ford/GM and now Toyota & Honda are scared shitless of Hyundai and its avalanche of cheap, high quality products. China could figure things out someday and make a similar turnaround. But until we see some sign of that happening, it's probably safe to scale back the "China's taking over the world!" hysteria.