[Rakyat Malaysia perlu membaca dua rencana ini untuk menilai siapakah yang lebih berwawasan sebenarnya.
- Editor]

http://www.straitstimes.asia1.com.sg/
analysis/story/0,1870,61275,00.html?

Asia's next crisis: 'Made in China'

By Kenichi Ohmae

TWO seemingly separate events occurred last month: Beijing was awarded the right to host the 2008 summer Olympic Games, and stock prices and currency rates in Singapore, Taiwan and Hongkong hit their lowest weekly marks since the 1997 Asian crisis.

Together, this says a great deal about the future of Asia - and the immense challenges that the rest of the world faces from China.

Policymakers and industrialists will soon be paying a great deal more attention to China, but not because of human rights, the militarism of the central government, or the opening of Chinese markets.

The Chinese production economy is about to explode with accelerating vitality, and the rest of the world is unprepared for it.

I saw the implications of this recently on a visit to a three-year-old manufacturing plant in the Pearl River Delta, one of the fastest-growing regions in China. This plant had 50,000 workers - all young women, and none wearing spectacles.

'Don't you have any employees with bad eyesight?' I asked the manager.

He replied: 'We fire them when their eyes go bad. They can find another job - that's not my problem. There are plenty of people who want to work for us.'

From the perspective of industrialised nations, practices like this are brutally cruel and would not have been allowed under their labour laws.

But in Shenzhen, Shanghai, Suzhou, Dalian and many more Chinese cities, where hundreds of millions of people eagerly flock to urban jobs from the hinterlands, such practices are taken for granted.

To find a comparable precedent, you would have to go back 40 years, to Japan's postwar economic surge.

There are also echoes of Dickensian England - the dawn of the industrial revolution - or the 'robber baron' era in America, when labour was inexpressibly cheap and technology was new.

One advertisement for a factory in Dalian, offering the equivalent of US$100 (S$180) per month, drew 2,000 girls from nearby farmlands. They literally surrounded the plant, seeking interviews.

Those who are hired work round the clock and live in company dormitories. They often study electronic circuitry or other high-tech skills during their lunch hours.

Those laid off (for near-sightedness or other reasons), generally do not return to the peasant life; they become urban entrepreneurs in the burgeoning freelance and service businesses of China's new cities.

By itself, China's glut of low-wage and highly-educable workers gives that country a remarkable competitive advantage. But there are three other engines fuelling China's economic juggernaut as well.

First, there is the political structure.

In the past few years, because of a concerted policy of economic deregulation, the People's Republic has matured from 'one nation, two systems' - an empire with communist and capitalist components - into 'one system, 10 nations' - a commonwealth of semi-autonomous, self-governing economic regions.

Some of these regions, such as Shenzhen, Shanghai, Dalian, Tianjin, Shenyang and Suzhou, are already growing much faster than any of the 'Asian Tigers', such as Malaysia, Taiwan, Thailand and Korea.

The population of these 'region states' is between five and seven million. Although China is nominally communist, businesses in these regions have far fewer regulations to deal with than their counterparts in Japan, France or Sweden.

By comparison, China is a capitalist's paradise, so long as you remain within these regions and do not deal with the central government in Beijing.

Second, Chinese industrialists are eager to learn and uninhibited by complacency.

I was a close adviser to several Japanese companies that cracked the US market in the 1970s and 1980s. I remember vividly their executives confronting that formidable challenge by saying: 'How can we do this?'

Today, their successors tend to enumerate all the reasons why they cannot act, and blame the economy and government for their troubles.

But Chinese companies have picked up where the Japanese left off.

They are developing innovative, low-cost export businesses in apparel, vitamin supplements, food (including shiitake mushrooms and vegetables popular in Japan), watches, consumer electronics and appliances, plywood, footwear, and precision electronic and mechanical components.

In the Pearl and Yangtze River deltas, there are more than 50,000 electronic component suppliers sophisticated enough to deliver their wares 'just in time' to the local Japanese and Taiwanese manufacturers.

In Japan, apparel companies like Fast Retailing (known for the Uniqlo brand) have taken advantage of large-scale production in China and halved consumer prices of high-quality clothing.

In the otherwise very depressed Japanese market, Uniqlo has been doubling its sales for three consecutive years, with an awesome operating margin of 25 per cent.

The direct approach, in which Japanese-designed products mass-produced in China are sold in company-owned stores, is now being called Uniqloization.

In short, China is rapidly supplanting industries that took other Asian countries 15 years or more to build.

The third and most influential factor behind the scenes has been the stability of China's currency. This represents either an accident of history or a supreme example of cunning foresight.

In 1997, when Hongkong was returned to China, Britain agreed to leave about US$38 billion of reserve capital in the territory - but only if the Chinese promised to keep the currency intact.

It was stipulated that for every new Hongkong dollar that its three central banks minted, they would hold in reserve the equivalent of about 13 US cents - a very high amount.

The Chinese not only accepted this, but also pegged their mainland currency, the renminbi, against the Hongkong dollar as well. They also prohibited exchange of renminbi outside of China, limiting speculators to the HK dollar.

AN AMAZING ECONOMY

IN EFFECT, by embracing a restriction against minting money to relieve economic pain, China has made itself immune from the currency fluctuations that have bedevilled Mexico, Indonesia, Russia, Brazil and Argentina.

The world has never seen an economy with these qualities before. And because it is so new, the effects are just now being felt.

Already, China is doing to the rest of the Asian economy what Japan did to the West 20 years ago. The currencies of and the stock prices in Korea, Thailand and Malaysia have declined precipitously since last year.

Some countries, like Japan, Singapore and Taiwan, are being hit much harder by this new competition than they were by the economic crisis in 1997.

What should politicians and industrialists outside China make of all this? We must shake ourselves out of complacency.

For decades, economists and investors have waited for China to wake up, fearing its overwhelming population but lusting after its enormous market.

Finally, the awakening has begun, and it will expand much more quickly than most of us expect.

If Hongkong's trading volume is added to the export and import volumes of China, it becomes the third largest trading nation in the world, trailing the US and Germany, but surpassing Japan.

There is reason to believe that China's central government will evolve rapidly into a 'United States of Chunghua', with most economic decisions made at the regional or provincial level. (Chunghua translates into English as China and carries the meaning 'the prosperous centre of the universe'.)

China's regional autonomy is far stronger than Japan and Germany's. Chinese states compete against each other for foreign investment and markets.

TEST OF ECONOMIC DOGMAS

THIS regional competition will further accelerate China's economic expansion far beyond anything we have seen in Asia to date.

Americans and others will be forced to trade with China, as consumers will demand China's inexpensive products and producers will require inexpensive components.

Other nations will be challenged to match China's unfair advantages with innovation and other forms of competitiveness.

And it won't be easy. Each time a Chinese industry has competed directly with a foreign industry, China has won.

That does not mean that China should get blanket political approval from the West. On the contrary, it has never been so dangerous.

China is not a democracy, and the human rights and totalitarian abuses of the Chinese government will continue. But they will occur in the context of one of the most highly capitalist societies on the planet.

This, in itself, will test many prevailing assumptions about economic development.

For example, Western nations have traditionally preached that democracy is a prerequisite for economic prosperity.

But democracy at this stage of China would lead the majority of its population to demand greater distribution of wealth, as they have in India.

But there are still 900 million farmers in China with an average annual income of US$500. Distribution of wealth would lead, as it has in India, to the distribution of poverty.

So it will be a long time before China adopts democracy and the central government gives up its unchallenged power.

American politicians and business people seem to oscillate between viewing China as a James Bond villain and a market to be exploited. Both of these views are now obsolete.

Many of China's consumers, for instance, will be cunningly reserved for its own domestic industries. China is a fierce new economic competitor, perhaps the fiercest since the US itself came on the scene at the turn of the last century.

In the short run, China's emergence is triggering a second Asian economic crisis more severe than the first. But unlike the currency speculators who triggered the 1997 crisis, China won't go away.

In the long run, the ability of a company to thrive in this new world will depend on how well it can figure out how to 'internalise' China's advantage to increase its own competitiveness.

CONSUMERS HAVE IT GOOD

UNLIKE what the newspaper headlines indicate, competition is not a fight between China and the US or Japan, but a race in each market in which the victor will be the company that best internalises China's competitiveness to beat its domestic competitors.

The rest of us will have to temper our opposition to China with the fact that, as consumers, we will never have had it so good.

People around the world will soon come to depend on the quality and price of goods that China can provide better than any other nation.

When we finally meet the enemy, over in Beijing, we will find out it is us.

The writer is managing director of Ohmae & Associates and author of The Invisible Continent - Four Strategic Imperatives Of The New Economy. This article was first published in The Japan Times.

http://timesofindia.indiatimes.com/
articleshow.asp?art_id=1693016402

Hitachi to cut 1,670 jobs, close 3 plants in Malaysia

KUALA LUMPUR: Japan's Hitachi Ltd. will cut 1,670 jobs in Malaysia by the end of the year in line with its plans to halt the production of cathode ray tubes (CRTs) for personal computer monitors, a senior official said on Tuesday.

An official for the local unit Hitachi Electronic Display Devices (Malaysia) Sdn Bhd told AFP on condition of anonymity that the move was in response to a fall in prices for CRT monitors.

The workers who will be laid off will come from the company's three plants in the southern state of Johor, he said, adding that the redundancies will happen in stages.

"By December we will stop production. Workers will be adequately compensated.

"Our production (of CRTs) has fallen by 50 percent from last year. The profit has also dropped," he said without elaborating.

The three manufacturing facilities will be sold off, the official added.

Major hi-tech firms worldwide are already slashing semiconductor production and halting some operations due to a worse than expected slump in the information technology sector.

Hitachi, which is Japan's third biggest chip producer, recently announced that it had stopped production of chips for cellular phones at a new factory in Yamanashi.

In June Hitachi cut 550 jobs in Singapore and shifted all its colour television production to factories in China and Indonesia. ( AFP )