Auto Service World
News   May 17, 2006   by Auto Service World

Don’t Ask Government to Protect You from China, says Leading Economist

Only 27 years ago, China’s per capita income was about the same as it was in year one A.D. That has all changed, says economist Michael Cox.
The rapid upswing in earnings has the People’s Republic trending upward almost vertically over the past three decades.
“Now of course they are starting to get into auto production,” says the Dallas Federal Reserve Bank executive, kicking off the Global Automotive Aftermarket Symposium that runs this Wednesday and Thursday in Dearborn, Mich.
The 11th Annual Global Automotive Aftermarket Symposium attracted four hundred leading automotive aftermarket executives to hear presentations over the day and a half event on the theme of “Thriving in a World of Change.”
As such, Cox’ presentation was right on target.
For China, he says, the growth is apparent simply opening curtains on a Shanghai hotel room and looking out the window. Building is going on at a breakneck pace. Two 35 story building are completed every week, and the building plan is committed to doing this for at least the next six years.
In industry, China’s growth is not just in automotive, but it is focused on manufacturing.
America has only 11% of its labour force in manufacturing. China moved 100 million of its people into manufacturing in the last decade.
But China is not the only challenge ahead. While it is developing as a manufacturing nation, India is developing as a service industry nation.
“They come out number one as an outsourcing centre,” says Cox. India is involved in accounting, translations, form processing, content management, and e-learning.
“So China and India are vying to be the new world leaders. Add in a few eastern European nations entering the economy and you have about 3 billion New World capitalists in the world.”
He says that this is guaranteed to have an unsettling affect. The opening of new markets, foreign or domestic, revolutionized the economic structure, destroying the old one, creating a new one. It upsets all the cost calculations, all production functions, and hardly any ways of doing tings.
Currently, about 80% of Americans work in the services industry.
“Right now if you look at where China works. It has a labour force right about where the American labour force was in 1882. India is where we were in 1942.
“But it will take them much less time to move people. It looks like India and China catching up, but then Japan and Germany looked like they were gong to catch up, but never did.
“Still, China and India are definitely making faster growth. How we stay ahead is the challenge. What do we do? What we do not do is think of them as the enemy.”
He says that turning to the government for protection doesn’t work. It only fosters lack of competitiveness.
“That is what has happened to Japan. They have tried to fight competition by protecting its own industry. Even the rhetoric of protectionism is dangerous because it stands in the way of innovation.
“Talking people into buying American products is not as good as simply getting them to buy an American product because it is the best one.
Case in point, the rise of the imported luxury car.
In 1981, average price of car sold in the U.S., imports and domestics, was about $9,000. In 2001, this had risen to $19,0.00 for domestic makes, but had risen all the way to $27, 000 for imports.
“So you don’t solve the problem by trying to legislate it away. Competing makes us stronger. So what do we do? Simply make the best product.”

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