The Foxconn Effect Means Nothing From China Will Be As Cheap Ever Again
There was a time, not that long ago, that companies like Wal-Mart could demand that products made in China cost less and less every year. I read tonight in the Wall St. Journal about many reasons that this has changed, and from now on, the story said that prices of things made in China will be going up instead of down.
Chinese workers are getting big raises–and the seemingly endless supply of young men from the countryside who come to the cities for jobs in sprawling factories is dwindling. As a result of the country’s one-child policy, there is now a shortage of people between 15-34 to do the work.
The story cited the “Foxconn Effect.” This is the trade name of the world’s largest manufacturing company, Hon Hai Precision Industry, that makes among other things, iPads, HP computers and iPhones. A string of suicides by workers has spurred the company to raise wages 30% or more for the more than 100,000 citizens who work for the company. Another factor is the Chinese yuan, which is finally being allowed to rise, making everything from China cost more.
For the hundreds of US companies who rely on Chinese manufacturing, the only hope is to move farther away from coastal cities, to inland plants where the pay is lower. But with higher transport costs—well, it’s time to face the fact that nothing will ever be as cheap as it once was, in China or anywhere else.