How do we survive Chinese manufacturing technology ?

[Catweazle]

Every now and then I watch a Youtube manufacturing machinery compilation. As a machinist and "maker" these are relevant to me.

I'm finding them rather depressing recently, it's difficult for me to imagine how we can either compete with them or continue to afford to buy from them.

In my head, "wealth" is not money in the bank but owning objects that are either useful or pleasing, an effective central heating boiler or a good quality pair of headphones. It seems that nearly everything I see for sale is now made in China, which means a constant flow of goods in and money out. How is this in any way sustainable ? How long can this go on ?

If we were exporting the raw materials to China then I could understand it, but we don't. Is the wealth of the UK simply draining away ? Are we spending the proceeds of Empires gone by ?

When will the UK barrel of money be empty ? I know we make money on service industries like banking, but it won't take long for the rest of the world to replace that with something local.

Am I missing something important ?

[adam2]

I view the rundown of UK manufacturing, and the reliance on imports from china to be most concerning.
Not only are we exporting jobs and wealth to china but we are thereby supporting a regime with a poor record on both the enviroment and on human rights.

There is no simple answer, but here are few ideas that might help a bit.

A policy of "buying British" when possible. Not a cure all since in many cases there might not a be a British made product. However when the choice exists, Buy British.
When public money is being spent, a SLIGHTLY higher purchase price for UK made goods could be justified on the grounds of protecting UK jobs and reducing the cost of unemployment benefits. Consider also the indirect gains to the UK economy. A UK factory worker earning say £500 a week will have more money to spend on goods and services than if reliant on benefits. Hopefully not all their wages will be spent on imports.

The planning system also needs reform to encourage the building of factories and related facilities.

We also IMHO need a better education system with a lot more emphasis on physics, chemistry, maths, science and engineering related subjects and less of "social studies" type subjects.

[kenneal - lagger]

A change to the taxation system would be a good place for a start. An import tax to reflect the differing costs of living across the globe would be a good place to start. That could then pay for a reduction in taxation on workers and employers here which would make British goods more competitive on the home market.

I like the idea of a change in the education system as well. Even when we were producing some of the best engineers in the world there was always the sense from arts and classics based scholars that their subjects were superior to mere physical and scientific studies. That attitude still exists today, unfortunately, because the arts and classics don't feed the country, nor power it, nor clothe it nor move it and its physical requirements around the world. When the EROEI of fuels approaches 5 we will find that we can't support artists and classicists in any numbers at all and they will either have to get a productive job or starve. It is the surplus energy we get from fossil fuels which has allowed the arts and classics to flourish and that surplus energy is reducing rapidly.

[BritDownUnder]

I recall that the UK biggest export to China was China clay used for making paper. The UK's long running trade deficit seems to have had the effect of hollowing out the economy. The wakeup call for me was the takeover of UK companies by foreign firms. There you have the trade deficit leading to a capital surplus, so foreign countries are investing the trade gains in the UK by buying not UK goods but UK assets. Australia has less trouble as it can just mine more things and sell them to buy foreign goods - for the UK that is not an option.
To answer Catweazle, yes the wealth is draining away. When people got their allowance of British Gas shares in the privatisation and then sold them immediately to get a new TV or foreign holiday the wealth drained away from the UK. The inheritance from parents house either gets pissed away on consumer products and passing fads, once the government has taken its share in inheritance tax of course.

How the Chinese have managed to fool the world for so long is beyond me. I can only assume that politicians and captains of industry were seduced by the profits and opening of the Chinese market they thought could be made. My present company, ABB is a complete sucker for moving things to the lowest cost country of production, i.e. China and India, regardless of other implications i.e. supply chains politics etc. I found that General Electric, my previous employer being American was a bit more wise to China and fewer of their products were made there.
You would be surprised how few parts in a power plant are made in China. On the Japanese owned gas plant I worked on there was absolutely nothing made there for probably political reasons.

I can only think that the best hope is for the EU and the US, and presumably followers such as the UK and Australia, will have to go it alone and cut China out of the whole process. China has shown its hand and real intent with the boycott of Australian products. From what I read China is at the moment a surprisingly low tech place with a lot of volume manufacturing but little skill in advanced technology but that is changing. Having spent time, the general shoddyness of everything from construction to quality to food is apparent. This recent chip shortage is something they may capitalise on. Apparently the US is stopping them getting the chip making equipment.
China made a good move in the field of Renewable Energy. Without the distractions of elections and government changes they can really focus on the longer term.

I am not sure that going for more STEM and less liberal arts at universities is of much use. From what I hear from UK based engineers it is hard enough to get a job there with the low numbers of graduates from engineering schools as it is. Putting more graduate engineers in an oversupplied job market is not much good. I would suspect the only real impetus would be a conflict that forces things to be made at home again.

[clv101]

How the Chinese have managed to fool the world for so long is beyond me.

Who's fooling who? We (the west) get all the stuff and the Chinese get a load of fiat currency and government bonds.

[BritDownUnder]

How the Chinese have managed to fool the world for so long is beyond me.

Who's fooling who? We (the west) get all the stuff and the Chinese get a load of fiat currency and government bonds.

From America yes. I am not sure about the UK and other countries. In Australia, one of the few countries with a trade surplus with China, until recently they were big buyers of mines and land and Chinese individuals were big in the property market in the larger cities. Try buying land in China. In New Zealand they own a lot of the commercial farms and bought the main agricultural supply company and the New Zealand Fisher and Paykel brand. I would say that quite a lot of gold in Bank of England has got China's name on it nowadays. I hear they own the MG brand these days for what it is worth.

As for stuff I wonder how much of it will be in the dumps in a few years. I still have Marks and Spencer Made in the UK clothing from 20 years ago and the Made in China stuff lasts a year at most. I think China is playing the long game eroding Western industry and technological edge.

So again. Who's fooling who?

[Catweazle]

I know that China is busy changing foreign currency for gold and high-tech machinery, the recent record price of copper might be a clue too.

[BritDownUnder]

I know that China is busy changing foreign currency for gold and high-tech machinery, the recent record price of copper might be a clue too.

I heard from somewhere else that the Chinese are storing copper. I think the price rise recently is a variety of factors such as increased renewables which is a bit more copper intensive and maybe some national hoarding as well.

I have heard that they really want to get their hands on high tech microchip making machines. I think there are quite a few in Taiwan.

With regard to the fiat currency and T-bills I am sure the Chinese are not too keen on holding them and paying for the US foreign policy blunders and would probably try to get rid of them if they could. If they did not invest their proceeds of their trade surplus overseas their currency would probably begin to appreciate, assuming they do not have other ways of manipulating their currency, and manufacturers would buy from elsewhere.
I should add that for China to buy things that it needs it probably needs a store of US dollars to buy things internationally as few countries have shown much inclination to accept payments in Renminbi currency. Doing so would effectively force them to purchase goods only from China. I do think that Iran may have signed such an agreement with China to deal in their oil in RMB as US dollar transactions are subject to US sanctions/scrutiny.

Are the Chinese not funding Hinckley Point C with some of their capital, or do I not understand that deal?

[kenneal - lagger]

I don't see a problem with the Chinese owning British companies per se but the problem comes with the intellectual property of those companies or if the Chinese start shipping factories and their equipment back to China. If Rolls Royce Aero Engines was bought by China then we would have a problem although much of the value of that company is in the engineers themselves and i doubt that many of them would want to relocate if ordered to. Foreign ownership is problematic but not something that a bit of nationalisation couldn't fix!

[BritDownUnder]

I don't see a problem with the Chinese owning British companies per se but the problem comes with the intellectual property of those companies or if the Chinese start shipping factories and their equipment back to China. If Rolls Royce Aero Engines was bought by China then we would have a problem although much of the value of that company is in the engineers themselves and i doubt that many of them would want to relocate if ordered to. Foreign ownership is problematic but not something that a bit of nationalisation couldn't fix!

Did that not happen during the final years and demise of the Rover Group. I seem to remember the Chinese partner shipped all the equipment back to China after claiming they owned it, and the conduct of the British Rover directors was not very appropriate and quite probably not very patriotic either.

From personal memory when I lived in Telford I recall an article in the local paper about 20 years ago when a supermarket plastic bag making company workers in Telford reported having to train visiting Chinese nationals how to operate the machines. Sure enough some time later the machines were shipped off to China.