From America’s grease to China’s bursting bubble
08 June 2008
It is fascinating to stop and look around at what is happening in different countries. Not just the usual stuff like a new factory or a big trade show, but the sort of broader news that impacts on our industry without actually being about it.
First of all to round-up on last week’s column, when I bemoaned the fuel market and also suggested it was down to our industry to help the world along by providing it with a means of commercially harvesting solar energy. A number of people wrote in saying that we were already there (G24i and Spectro Labs were the first couple of names that landed in my inbox – although I believe in these and other cases that direct sunlight is still the essential ingredient) and I thank those who did pass on their thoughts.
I won’t spend much time on this because it really has nothing to do with electronics manufacturing, but it so happened that two other stories cropped up this week that are directly related. Using biodiesel is nothing new; in Brazil it is the staple fuel supply, although there are those who complain that the environmental benefits of growing your fuel are negated by chopping down the Amazonian rainforest to provide the necessary agricultural land. However, here in the UK there were stories emerging this week of people using off-the-shelf (shall I call it COTS to give it an engineering feel?) vegetable oil to mix with their diesel. A litre of vegetable oil in the supermarket costs half of what fuel does in the filling station and as long as you know what you are doing then it performs just as well.
The other related story takes the vegetable oil argument a stage further. Apparently a burger bar in Seattle found its fryer grease being siphoned off in the middle of the night for nefarious use as fuel, as at 67 cents a litre in blackmarket value it was considerably cheaper than the equivalent at the garage. The thought of deep fried food floating around in my car is not one that gives me a secure feeling about my engine performing to its full potential, but I guess the thieves knew what they were doing (except, of course, that they got caught). In fact, when I mentioned this story in the office I was told the story of a couple of newlyweds who are still on a journey around Australia in a car fuelled by oil from fish and chip shops. The car has been named ‘Battered Fish’ on account of its own special aroma and that tells me that this is another good reason why this is a bad idea.
But my thoughts this weekend went from high cost fuel to low cost economies, and to China in particular. A simple but stark reminder that any low cost economy has to ‘make hay while the sun shines’ – it will not go on forever. In terms of electronics manufacturing, a certain area may prove to be bad at something and so it stops getting customers, or good at something (like China) and develops away from its low-cost label.
Everyone knows this is going to happen, as it is a process that is already underway. A reminder of this came this weekend when 18-year olds in China sat their end of school exams that effectively established whether they could move on to further education or not. Some 10.5 million of China’s top students were after 6 million places. The scale of this intake is astonishing – the cost of educating that number of students at colleges and universities is vast and at the end of their four years in higher education, these students expect a certain standard of living that is far removed from the low-cost model of Chinese manufacturing. Coverage of the Bejing Olympics later this summer will highlight to the world how much further forward China is from its traditional global perception.
However, development can only develop at a certain pace. These exams in China are far more important than in Western countries in as much as they go a long way in defining a student’s life. To fail these exams effectively ends hopes of a successful career and the social mobility that this can entail. So my heart goes out to those Chinese students. My own children are going through end of academic year exams at the moment, as I think many children around the world do at this time of year, but for all that it seems life or death to them at the moment (they are teenagers after all!) the consequences are not as significant as they are in China.
The point of bringing this up is that it is a clear demonstration of another financial demand on the Chinese infrastructure. In fact, the discussion about fuel is another example, as the Chinese government effectively caps the cost of fuel, but as the global oil cost rises the government has to bear the cost of the difference. Again, the demand this places by an evermore consumer-driven populous is great – is it all a bubble waiting to burst? And if it does burst (rather than gradually ‘equalise’ itself), how low-cost will China be then?
Finally, a welcome back to our Indian correspondent Anand Sethi after a brief spell of illness. Now fully recovered, Anand has provided an excellent article this week essentially about the hypocrisy around sustainability – it makes an excellent read.
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