Did not know this until this morning – the third largest contributor to the United States’ trade deficit after oil and gas is SEAFOOD.
Plans are underway to possibly increase fish farming domestically so that the middle class can recover and we can hit Dow 90,000.
Come to think of it, I have been wondering why there is Chinese tilapia in Missouri grocery stores. Doesn’t seem to make sense.
Mish’s Global Economic Analysis has a wonderfully-juxtaposed view of two countries’ long-term economic strategies. He lays in stark terms, the implications of China’s current drive toward “indigenous innovation” as the next wave of its development strategy, versus the United States’ long-term obligations to the two nation-states currently occupied by its military.
Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050. The landmark document that launched the campaign carries the bureaucratic title “The National Medium- and Long-Term Plan for the Development of Science and Technology (2006-2020)” (now known in the West as the MLP). Bland as the title may be, the MLP describes itself as the “grand blueprint of science and technology development” to bring about the “great renaissance of the Chinese nation.”
If you care about the global economic future whatsoever and if you only read one document this year, this one should be it.
Meanwhile, where is the United States’ attention going? Barack Obama’s speech the other night said we are going to win the future through all pulling together and using all kinds of clean energy and competing. But while all that great stuff comes to pass, Mish points out that the United States is still stuck fielding armies in 140 countries. This isn’t a condemnation of such a military strategy, it’s just a question: Since China isn’t stuck doing things like this, are they free to pursue other strategy and execute them well?
This is a big deal.
China has launched trading in its currency in the U.S. for the first time, an explicit endorsement by Beijing of the fast-growing market in the yuan and a significant step in the country’s plan to foster global trading in its currency.
Repeat this scenario after me: RUSSIA SELLING OIL TO CHINA IN YUAN INSTEAD OF DOLLARS.
And right there, it’s going to be a brand new world.
We have been following trends in manufacturing in this secret, surprising locale – the United States – for more than ten years. Shocking, avant-garde behavior? It shouldn’t be – the United States remains the world’s largest manufacturer, though statistical debates rage as to whether China has actually overtaken the U.S. for the top spot. Either way, China has been gaining fast, the U.S. is less reliant on manufacturing for it’s GDP, and trends in both countries are fascinating and essential if you want to forecast the future of the world economy.
Derek Singleton at the Software Advice’s Manufacturing Blog sees U.S. manufacturing as resurgent, and that American companies should start strategizing now for the coming wave of “re-shoring.” They report some surprising drivers:
More manufacturers are bringing production back to North America. We think the three main drivers of this trend are:
- Increases in the cost of ocean freight transportation, which has increased by as much as 150% since the 2008 lows;
- Longer product delivery cycles that make domestic manufacturers less responsive to consumer demand; and,
- Poor production quality standards that have resulted in the delivery of defective goods.
The cost issue is really the key trend driver – increasing the price of shipping would be as easy as a spike in oil prices, and cost of doing business in China will no doubt increase as the nation’s infrastructure spending burns along at 10% of its GDP. Singleton’s view on macroeconomics make sense as well:
The rising cost of Chinese labor is prompting domestic manufacturers to reconsider their off-shoring habits. Last year, Chinese inflation rose to 5.1% – its highest level ever. Sure, Chinese manufacturing remains far less expensive, but a trend toward higher costs is clear.
People talk of the Chinese economic miracle – the last bastion on Earth with that incredible 10% GDP growth! Well, that means inflation of prices too – likely some of the same prices that make manufacturing there so attractive.
Our colleague Paul Denlinger told us in his podcast that the Chinese strategy may be to develop a sizeable middle class to buy up its manufacturing output. At the same time, the U.S. could return to manufacturing for its domestic market as well. Very 1970.
This may answer the question, “What will the U.S. do for a living?” Answer: make stuff.
Gautam Ghosh takes our idea that last-generation HR practices impede creative destruction a step further – saying that these practices are why entrenched companies fall into Clayton Christensen’s famed Innovator’s Dilemma.
In this era of mergers, acquisitions, bailouts, and too-big-but-I-guess-that’s-OK, we forget that large organizations by their very nature will tend toward self-defending bureaucracies. What these mammoths gain in stability, they lose in flexibility almost all of the time. And while you are in your 97th interview for a candidate with critical skills, there are hungry companies elsewhere in the world ready to hire TODAY so they can grow, innovate, and attack the incumbent without mercy.
I knew this had become serious when a Chinese partner of Competitive Futures complimented us that we worked at “China Speed.” When I demanded what this phrase meant, I was informed that these days, it took most Americans six months to have the meetings required to decide what to have for breakfast. In China, I was told, if you wait that long to decide on a fruitful opportunity, somebody else already has ten million invested and their logo pasted on everything.
History favors the bold.
