Ask Dylan

“China has long prided itself on being the world's workshop. Shipments of labor-intensive, low-cost goods -- everything from toys to tube socks to tires -- turned the country into an exporting colossus, powering growth of nearly 10% a year for the past three decades. But as Beijing is now realizing, there's a downside to that strategy...

“China's technocrats are introducing a series of measures designed to change the face of its export industry. On their own, each of these initiatives may not seem momentous. But as a whole they define a major change in China's industrial policy--one that favors higher value-added industries such as sophisticated electronics and heavy machinery, possibly at the expense of low-cost manufacturing and assembly. And they're sure to help boost efforts by companies at the low end to move away from simple production for multinationals and develop their own designs and brands. The potential payoffs: a cleaner environment, better-paying jobs, and an improved reputation for the country's goods.

“It won't happen overnight. But the Chinese government is using a combination of carrots and sticks to get companies to fall into line… The changes will force companies to make ‘more technologically advanced products and develop their own brands,’ Wang Qinhua, a director at the Commerce Ministry, told reporters on July 25...

“Beijing's edicts will speed a process already set in motion by market forces… ‘For years, China has beaten its competitors with low costs,’ says Liu Xueqin, a researcher at a think tank affiliated with the Commerce Ministry. ‘This strategy has now run its course.’

“One company feeling the squeeze is Wenzhou Taima Shoes… When Wenzhou built a new factory in 2005, it imported more costly shoe-manufacturing equipment from Italy to replace its Chinese-made machines...

“Other Chinese exporters are investing in foreign knowhow. Three years ago, Zhejiang-based High Fashion Silk Co. began hiring Italian and American designers to create clothing and ties for customers such as J.C. Penney and Liz Claiborne. General Manager Lin Ping says it's money well spent because his buyers are willing to pay some 10% more for the new designs. ‘A company's ability to survive depends on its innovation,’ says Lin.

“Economists point to China's changing export mix as a sign that the country is making the transition out of low-end manufacturing and into more advanced sectors. One example: China recently turned into a net exporter of industrial machinery, led by the likes of Shanghai Zhenhua Port Machinery Co., which makes more than half of all the cranes used at the world's ports. And high-tech gear accounted for 29% of China's total exports last year, up from 15% in 2000.”

(“China Rushes Upmarket; In the face of scandals, Beijing shifts incentives to higher-quality exports.” Chi-Chu Tschang. Business Week: September 17, 2007. , Iss. 4050; pg. 38)

A GENERATION HAS PASSED, and we've seen it coming...

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone…

Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls…

And don't criticize
What you can't understand…
Your old road is
Rapidly agin'.
Please get out of the new one
If you can't lend your hand.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.
(Bob Dylan)

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