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Addicted to the “Crack” of Chinese Manufacturing?

In a post Brexit Britain maybe we should be considering more the “Craic” of the Commonwealth.

Posted on: 17 Apr, 20

Coronavirus has highlighted our addiction to China’s manufacturing base. Companies should be cautious putting all their eggs in one basket at the best of times and becoming dependant on any one country, particularly one without a rule of law we are familiar with. Perhaps it would make more sense to get off the “Crack” of China, and take up the “Craic” of Canzuk and the Commonwealth?

Have you ever taken drugs, Clark?

Umm. I smoked pot once at a party at university… but I didn’t inhale

Of course not.

Well, what about you then?

Let’s just say I’ve been a little racier than you have. I’ve never actually been addicted to anything, but I could easily have been. You take something because it’s fun, it feels good, it’s easily available, you don’t even realise you’re getting addicted, and before you know it you’re hooked. You’re at a house party at 5 am trying to make toast in the DVD player. Addiction happens easily, ridding yourself of it is hard.

So what’s your point?

We are all addicts.

Really, we are not. Speak for yourself.

Our entire economies are addicted. And this Coronavirus has shown us we need to free ourselves from the addiction.

What are we addicted to? Toilet roll? Hand sanitiser?

China.

Oh.

It happened so easily. 30 or 40 years ago, China appeared on the scene, offering to make stuff cheaply. It made it well too. Transportation was cheap. Manufacturers loved it because it brought costs down. Consumers loved it because it brought prices down.

It’s called globalisation, Oury. It’s a good thing. More trade, more exchange, more progress, more prosperity. Everybody’s life has got better as a result. Global standards of living have never been this high. The number of people living in abject poverty has never been this low.

You don’t get it, Clark. Pretty much every industry has outsourced some if not all of its manufacturing to China. It’s like 99% of goods pass through China at some stage in the supply chain.

99%?

OK. An extremely large number. I don’t know the exact percentage. I don’t think anybody does. But we are totally dependent on China. Cars, computers, consumer goods, chemicals, construction.

Those are just the ones that begin with C.

Electronics, pharmaceuticals, medical equipment, and supplies, shipbuilding, industrial robots, even bitcoin mining. All these industries and more made the same choices – get costs down by outsourcing to China. But now we are addicted, and, as this Coronavirus has shown, we need to rid ourselves of this addiction.

Just say no to China.

Haha. China was like a crack dealer giving us cheap drugs to get us hooked.

I think that comparison is a bit strong. China was just competing for business by lowering costs. It competed better. Now it’s the workshop of the world.

You’re turning a blind eye to what goes on there. China may be cheap, but it is not a good place to do business. Their reporting is fake – look at how they concealed the extent to which Coronavirus had spread.

I suppose that’s why they call the game Chinese Whispers. Is our reporting any better?

If our government mis-states statistics, our media will take them to account. Chinese media doesn’t have that freedom. That misreporting led other governments in the world to react differently to the virus than they otherwise might have, and many have lost their lives as a result.

OK, but that doesn’t mean it isn’t a good place to business.

The rule of law is not the same there. You can’t trust them to keep their side of a bargain. Like a fortnight ago several hospitals in New York had contracts with Chinese companies for things like plastic gloves and masks, all of which were on their way, and the Chinese government said: “no, we need this stuff”. China then bans exporting masks and nationalizes an American factory that produces them there. Now America’s short of masks.

China’s just looking after its own people first. Factories in China cannot open for lack of industrial masks, so Beijing has taken steps to keep these items in China. It’s an international crisis. Some western countries might have done the same if the roles were reversed.

They have also tried to help too – they sent 1000 ventilators to New York in early April.

But they’re not reversed. Now China is starting to get business back to normal. Meanwhile we in the west have got the virus and our economy’s on the verge of depression.

I’m not sure China did that deliberately.

Doesn’t matter. Their cultural need to save face causes no end of misery and mystery to us. It’s insane to rely on China for strategically important goods, now we know that when the chips are down they will do this kind of thing.

When the chips are down .. . can’t we eat prawn crackers? OK. So we sit out the lockdown. The virus passes and rules get made that certain essential goods have to be manufactured at home for national safety. Somebody finds a vaccine or a cure. Life gets back to normal. And we can carry on importing from China until somebody else comes along and does it better

It’s such a shortsighted view. You’re not saving money. You think you are but you’re not. I know of instances where western businesses have had their IP pilfered by the Chinese. If you lose that, you’ve lost everything. If something goes wrong, you can’t sue. The Chinese are obsessed with saving face. It’s part of their culture. But there is no concept of loss of face to foreigners.

A bit like my holiday in Ibiza… So what do we do then?

This Coronavirus is going to change the way we do business. I’m not saying globalisation is a bad thing. Of course, supply chains are going to be international. But be very wary about doing business in China, or even be dependant on any one nation for so much You won’t be dependant on one customer, nor should you be on one country – particularly where there is such a clash of business practices between ours and theirs. You might save money in the short term, but long term you will lose. There are many good alternatives, so think about them.

LIKE WHO?

Well you could start with picking up a mild addiction to Canzuk

Oh god Oury, is this some sort of new crack related pun?

Not exactly, it is the theoretical and political union of Canada, Australia, New Zealand and the UK. The new Europe effectively, representing 7% of the world. Free movement of people and free trade, with countries which have common law, and even share the monarch and all their intelligence (5 eyes) already. In a post Brexit Britain – we think this is a blooming brilliant idea, and whole heartedly support it. Check out www.canzukinternational.com.

Oh that’s jolly good. That has cheered me up no end. I do hope that happens

Yes, lets hope. Certainly we would say to anyone considering expanding their business who is currently based in any of those territories to think about doing business within countries with common law, and the commonwealth – you will know better where you are.

Agreed. Different cultures is what makes the world what it is and I think there is a need for both sides to better understand one another to make business flow better. That said, out of a bad situation comes good, and if anything, the current situation we find ourselves in should make businesses re-assess their supply chains and source local manufacturers as much as they can. I’m hoping that consumers will now really be prepared to pay a premium for something that has more components sourced locally. That would be one bit of good out of the current bad.

In city centres?

There are many businesses that will want a team working in one place. You can do it remotely, but can you do it better in a team.

Yes, but then you might get clusters. Something like Leamington spa – which makes some of the worlds finest video games.

Leamington Spa?

Yup. It’s clustered with video games geeks. That’s another thing!

What?

Driverless cars.

Not going to happen.

They’re inevitable. And when they come, using the internet of things to communicate with other vehicles, traffic lights and navigation systems, they will deliver quicker, cheaper, crowd-free travel. Journey times will lessen and they’ll make migration away from cities all the more practical.

They’ll make HS2 look ridiculous.

Even more ridiculous.

This doesn’t bode well for house prices

Not in city centres, no. There isn’t going to be much buying from overseas. Not much tourism. Things look grim for the theatre district and the entertainment industry. Central London has big problems.

There are some positives to that, I suppose, if some flash city centre block becomes affordable housing.

But people moving from London to the regions should be good for the regions. This is another trend that was already in place – property prices in London had been lagging the rest of the UK since 2015, before Corona came.

Well, the tech literate are going to have a huge advantage in your new world, Oury.

Well you better enrol in that excel course then Clark – spit spot

Disclaimer

We are but two fictitious characters throwing out ideas and comment to stimulate debate and collect information. As professional service firms, we are open-minded people and think independent thought and debate are essential to help us understand as well as navigate complex problems. By joves – doing business across Europe (and the world) is set to become a whole lot more complex in light of recent seismic political events. As businesses – we provide information and hopefully some wisdom – and we see this blog and its caricatures merely as a much more fun, perhaps slightly controversial, way of stimulating debate and collecting ideas. We’re searching for some true pearls of wisdom, and as we find them, we’ll share them with you.