The China Strategy - interview with Edward Tse

Art Kleiner, editor-in-chief of strategy+business, interviews Edward Tse, Booz & Company Senior Partner, about his book, The China Strategy

Category:

News & Politics

Tags:

• Booz
• Booz & Company
• Edward Tse
• Art Kleiner
• strategy+business
• strategy + business
• China
• business
• strategy
• business books
• The China Strategy

[stalkingalizee]

Foxconn, which is China's largest employer, recently had wage strikes. Now their latest press release says they will be packing up back to Taiwan for automated factories and India and Vietnam for low wage work. This is only the start of things to come. Chinese exporters have already said they are surviving on 1-2% profit margins, if they have to raise wages 100%, they will go out of business. China as an export giant is coming to an end.

[stalkingalizee]

There are 400 million smokers in China, by 2020 1/3rd of the population will start dying from lung disease and that figure will only increase as life expectancy will drop. The age Chinese factories want is 18-25 but they are now giving jobs to 70 year old women, they cannot find the workers.

[metalbelias1]

@stalkingalizee and with the stablization of the wages in China for technical workers ( i speculate after several 'strikes' the solution will be surfaced by the government), China will still be attractive for foreign exporters, since the labour force are still attractive. What do you think? And as a local chinese living in S'pore, i got to agree that we were brought up to be 'thrifty', in fact too thrifty! thanks for your reply pal : )

[metalbelias1]

@stalkingalizee Thanks for the wonderful insights you have, and your inputs were certainly helpful in my project! Thanks for your time, but i have a question for you. As you mentioned , 2/3rds of the population will be over 30 by 2020, i have checked out that the aging of China's population will be about 11% of the population over the age of 65 in 2020, which is considered to be normal/slightly higer than average.

[stalkingalizee]

Problem is Chinese cannot afford healthcare. This is why they save their money instead of consuming. For 1.4 billion people China would have to spend $4 trillion to reach European levels of care. After Mao was gone, they cancelled universal healthcare and are now paying out of pocket. With their demographic problem they will not be able to do it. Chinese will always save even worse than the Japanese which means China will be stuck. They also will be heavy net importers of energy and H2O 

[stalkingalizee]

Lets break it down, Chinese rivers will be near dried up by 2030. Coal production will peak in 2015. 2/3rds of the population will be over 30 by 2020. Migrant labour has already dried up and now they are on strike for higher wages. Foreign exporters are starting to leave for India and Vietnam and this trend will continue as wages rise. The only way for China to save itself is to turn from an exporter into a high consumption economy.

[metalbelias1]

@stalkingalizee Do you think china has the potential to expand exponentially in the long run, if we take a long view? Would love to hear a view from yours!

Regards,

Metalbelias1

[stalkingalizee]

If we take a long view, China will be Japan of the 1990s. Decades of stagnation.