Nobody said the West was bad!
29 May 2007
Let me be clear, the state of the electronics manufacturing industry in Europe and America is not bad, although that was obviously the impression that some readers got from my comment last week – and I thank all of those who did respond with their views.
So if you read my comment last week and thought that I was saying that the West was plummeting into obscurity then I apologise for being misleading.
One reader summed it up by describing his quality manufacturing operation and concluded: “In short - Americans can and do compete in the global market. Many of us just don't have the time or the need to publish our accomplishments.” And this reaction is really at the core of the matter.
For one thing I don’t think any company, however good and well-known they are, should ever risk NOT publicising themselves. And secondly, and the point I was trying to make in the first place, is that there is not the thirst for knowledge in the West (or about the West) that there is in the East (and about the East). This is a global obsession based on the theory that China has become the world’s factory. But much of interest is happening elsewhere both in terms of markets and technology - and this should not be ignored.
And, unlike last week, I am going to be a bit of a doom-monger, and I apologise to our Chinese readers for it. I read yesterday that the Chinese stock market had sailed passed the 4000 barrier for the first time, representing a four-fold increase since the beginning of 2006. Part of the reason for this, the report said, was that Chinese workers were putting their faith in the Chinese economy by investing their savings in shares rather than less volatile forms of saving. Now it could be that such growth is justified, or it could be that such dramatic growth represents an unsustainable boom. ‘Booms’ are followed by ‘busts’ as we know in the West. However, the dot.com crash in the first years of this decade, apart from being caused by huge over-valuing of virtual companies, was also as a result of huge over-capacity in the electronics manufacturing industry, which is something unlikely to trouble China at present on account of its burgeoning internal market. One of the things that made the dot.com crash so bad for the West, was that China was waiting in the wings to take up all that manufacturing capacity that was no longer viable in America and Europe. Equally you could argue that there are other countries, notably India, that are similarly poised today should anything happen to China. Stock markets are temperamental things though and I do believe that Chinese investors should show caution – particularly individual workers as stock markets are unsentimental about where its finance comes from. Growth at the current rate is clearly unsustainable.
Hopefully it will slow in line with the market and the economy will balance itself out. But the nature of any financial markets is that they are squeezed for maximum gain by those working in the financial industry. While everything is growing this is fine, but if the markets were to crash the victims are often perfectly viable, well-run manufacturing companies who suddenly find the rug has been pulled from beneath their feet. We have seen it happen before and would hate to see it happen again.
Regards
Tim Fryer
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