I found myself fascinated by China Shakes the World: A Titan’s Rise and Troubled Future – and the Challenge for America by James Kynge. Yet most of the time I was also infuriated over how America has fallen asleep regarding China’s threat to our economy. Kynge has written an excellent book that should be read by every school teacher, mayor and businessman.
It was my goal to finish this book before the end of the summer Olympic games. But I needed time to finish Randy Pauch‘s one of a king book The Last Lecture (review is here) so this week was plenty of time to complete this book.
Infuriating? Yes Kynge shares a startling story about how the Chinese almost secured the assets to the American company that produces stealth coating to the B-2 bomber. Yes THAT Stealth Bomber. Now are you interested in what Hynge has to say? It was Financial Time’s Book of the Year.
So how does America’s secret stealth technology (a skin made with highly specialized thermoplastics and composites which are radar-absorbent) come within arms reach of the communist Chinese? Did they try to steal it? No, they almost purchased the technology outright.
What about pirating and corporate espionage? China plays this game very well too. And based upon the communist’s approach to banking, well lets just say their idea of business as usual includes very loose, corrupt accounting…kinda reminds me of Enron.
If you are frustrated with the RIAA’s music lawsuits against college kids encourage the RIAA to go to source in this matter: China. The Chinese have truly become the world’s leading Pirate Nation. A word of note to the music and movie industry: Do you really believe your lawsuits against college kids is making a dent in your attempt to stop pirating? Go to China.
The Chinese impact
It’s not on the gold medal stand in women’s gymnastics. As the saying goes … if your not cheating, your not winning. Regardless, it was the American gymnast Sacromone who fell of the beam and floor exercise that cost the team gold medal. I know the Olympics bring out national pride. We all feel good about cheering for our athletes during the 16 days of competition. But what about the other 349 days of 2008?
Just ask anyone who lost their job in Janesville Wisconsin, when GM announced in early 2008 it was closing an assembly plant which has stood since 1919. The latest round of GM plant closings will affect more than 25,000 families. Take into consideration the jobs lost by those companies associated with GM and the ripple effect grows much stronger. This is the reality Americans will been facing for the other 349 days of the year. The Wisconsin Governor said the announcement had the impact of a death in the family.
Its fair to say those lost jobs in Wisconsin are now apart of a larger offshoring plan by GM to simply remain “alive” in the automotive marketplace. This is a difficult time to find new jobs, with the economy sluggish at best and a mortgage crisis still underway. Those lucky enough to find jobs will be earning less with considerably less benefits. Is this the American Dream?
GM is also a victim of China’s pirating as they learned at the 2006 auto show in Beijing. A Chinese parts supplier built to GM actually built an exact duplicate of a GM SUV targeted for the Chinese market and displayed the vehicle just a few booths down from GM’s exhibition space. Yet GM did nothing about this. Call it Piracy or Corporate Espionage, they fear losing their entry into the growing Chinese market.
How would you like to be a student recently graduated from two area High Schools in Janesville this past May? As freshman, students may have entered high school to learn a trade loosely tied to their local automotive marketplace. As a result of Globalization they now realize future automotive jobs have forever moved to China.
Are schools in Janesville still planning to teach skills for auto manufacturing and assembly jobs? Makes you think if Janesville taught Globalization 101 to the classes of 2008?
The Ripple Effect
Consider this scenario: Your town’s GM plant employs thousands of workers. The plant has been a cornerstone of your community for over 100 years with generations of people in your town working for businesses related to the plant, from banks, bars, barbershops and bowling centers. As the plant grows and acquires new technology, GM donates legacy machines to the local high schools where teachers can help students learn a new skill that could lead to a full time job after graduation. Kynge even notes how China has established new schools in America including Lakeland College in Sheboygan (page 180) to help meet their growing need to educate their citizens for the global marketplace.
Janesville is just one of many GM factories that have been shut down over the last decade. More and more American production and assembly jobs are moved overseas. This is dramatically changing the American economic landscape.
However the impact of Globalization is not limited to America. When China forecasted the need to provide automotive parts to a quickly growing domestic market they chose to purchase the technology of an established foreign company rather than build new. And Kynge shows the Chinese do not pull any punches. Chapter 1 Rags to Riches begins with the German steel mill Thyssen Krupp in Dortmund which has stood since the late 1800s. This plant which had employed over 10,000 was purchased by the Chinese and shipped brick by brick (over 275,000 tons of equipment) back to China and rebuilt.
Foolish investment? This factory was on Volkswagen‘s list of factories that produced superior automotive-grade steel. So the Chinese moved a plant that manufactured world class parts and saved over 50% versus the cost to build their own unproven facility.
Kynge even documents how the Chinese even underbid local German companies to tear down the factory, shipping it back to China and completely rebuilding the structure in less than three years while the two best German bids estimated the tear down process to take three years alone. So how did the Chinese do this? They shipped their own citizens to Germany and worked them seven days a week until a German government’s protest forced the Chinese to give their workers one day off per work week.
Even companies in Germany are moving manufacturing production to China at somewhat alarming rates. Why? Schiess, a 140 year old company producing heavy duty lathes and boring machines in Aschersleben chose to move production to China. So why the shifting of jobs? A skilled worker in Aschersleben Germany makes $2,600/month while Schiess can now pay Chinese workers just $400/month. Shareholders rejoice. This move was hilighted in a 2005 BusinessWeek article.
Workers of the world beware. Kynge’s China Shakes the World is a much needed wake-up call. This was a gripping book. Parents, don’t let your child’s schooling get in the way of their education. China has made that a reality.