China’s business edge
On Page 13 of the July issue, I saw the encouraging article about China’s wages (“China’s Ceiling”). Years ago I saw similar articles about Japan’s wages. The ones about Japan came true, and I suspect the one about China also will develop into reality over time.
In any country it is the cost of labor, not the price of labor, that is important. I am not so sure that as China’s wages increase, the productivity of people will increase as rapidly as it might, thus reducing the gap between countries faster than thought.
That having been said, an analyst must also consider taxes and overhead. The U.S., being either No. 1 or No. 2 in highest tax rates in the world, has a distinct disadvantage compared to other nations. Add to that the huge overhead necessary in this country for such things as accounting, tax preparations, public relations and other (what I call) destroyers of wealth, and one can see that this country will be at a disadvantage for many years.
Even though I am limited in knowledge about China (except for a bunch of Chinese in-laws who are in business on the mainland), I have the feeling that the Chinese culture will not anytime soon require the American approach to business with big unions, big management staffing, and big, flashy sales departments.
The Chinese culture is more entrepreneurial. Thus, their cost advantage is assured for a few more years, no matter what happens to Chinese wage rates.
Thomas S. Fiske
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