Corona / Covid-19 Virus - General Discussion (politics go to the Off Topic / Politics thread)

The Chinese will pay in the long wrong, but not through debt instrument.

Many manufacturing facilities will be moved elsewhere as governments seek to ensure supplies of essential equipment and companies seek to reduce expose to events in one region. Cost will no longer be the only principal factor.

DP – ulitmately it isnt the answer.

The problem is the lack of transparency and the delay cannot be allowed to happen again, whichever the country might be.

The only way of ensuring this goal is strong international agreement and the willingness to ruthlessly enforce the agreement – rather akin to nuclear weapons and other weapons of mass destruction. If this is not done, history will repeat itself, and next time it might be a lot worse – as if this isnt bad enough.

There is now enough evidence that viruses crossing between species is an extreme danger. The chances of this is greatly increased with uncontrolled markets and the trade in exotic species. Whatever the cultural divide, it must stop, no ifs not buts and only international collaberation will achieve that result.

There are indeed plenty of other countries that would willing take over from the Chinese to a greater or lesser extent and I have no doubt there will be a shift in this direction as you suggest. If it is recompense the world seeks this will form part of it, but, I would suggest, far more important is every effort to attempt to avoid history repeating itself yet again.

Will China pay? Of course it won’t; they won’t even admit anything was done wrong.

Will China lose some business? Most hope that it does, and I am sure it will. The key factor here, as any manufacturer who uses China will know, is that their price advantage has been eroding over the years. 15 years ago they were say 1/4 of the West. Now they are say 1/2. Throw in

• the default quality level is CRAP and while they can make stuff of any quality you want, there is significant due diligence needed to set this up
• the often substantial shipping cost; often say 1/4 of the product cost
• the long sea freight time (25 days’ sailing time) → direct impact on cash flow
• if something goes wrong, and you are selling on to a customer with a lot of muscle (the usual situation nowadays; most big firms screw small suppliers) you often have to pay for air freight to make up the lost time, and the resulting 3x higher shipping cost eats a lot of your gross margin
• fairly frequent damage in transit; the freight companies are a mostly unaccountable bunch of shysters and wide boys, washing their hands of any damage and paying out say £20 per ton (!!) and then only after months of being harrassed
• the need to pay up front in most cases → direct impact on cash flow
• their rapidly worsening arrogance and general shyster behaviour (I am sure Al Capone would not have been as shameless as one of my suppliers)
• generally poor communications due to most not speaking English
• a great fragility in the relationship; they can excommunicate you via a trivial misunderstanding of an email advising them, politely, that the last batch was crap
• your good contact there is likely to be gone after a few months, to get 10% more money down the road
• their general total lack of interest in building a long term relationship with the customer
• their sh1tty IT practices, resulting in hacked mailboxes and fraudsters sending you emails with “new bank details”
• the MTBF of chinese companies being measured in single digit years
• the disappearance of all tooling you paid for when they vanish

and the other 1/2 is not worth a lot. A year ago I moved 2 product lines from China to local assembly and while it costs a lot more here, the saving in freight and other stuff compensates. The firm we used out there – based in Hong Kong which used Chinese firms to do the work – told us eventually that China is too unreliable, and that they are moving everything to Taiwan. A bit more expensive. I could have stuck with them – they were nice, very straight and proper old style English educated HK Chinese – but after various hassles and 3x loss of all tooling and test gear I had enough.

The cheap stuff will continue in China (because the West can’t make it / won’t make it / everybody here wants a big 4×4 in their drive, etc) but that’s not what they want to do to get rich. They want the added value business. They want to assemble classy finished products, not mould 10000000 plastic feet. It’s like Africa… they have always been used as a vendor of raw materials, which doesn’t make them rich because the money is in the later steps, but they have never managed to organise themselves to perform the extra steps. Yes; I know the old “exploitation” debate… Japan managed this in the 1960s and 1970s and they did it alone. They killed the British motorbike industry, just to show everybody how it’s done China is much slower than Japan… about 5 decades slower, and mostly they did not do it alone. The cases where they did it was where the West was heavily involved e.g. Apple turning up with the Iphone etc and sticking a load of US Apple staff at Foxconn to kick ass.

So Apple etc will stay with China too because it’s the only way they can make a phone for say $200 and sell it retail for say $1000, and make millions with that level of quality.

The stuff between these two is likely to be re-assessed.

It’s funny how a microscopic piece of RNA can make such a dent in the balance of power in the world. Tom Clancy would have loved it.

Peter – exactly, with the exception that I am not as convinced as you Apple will stay in China to the extent they currently are for various reasons.

I have just been involved with a very large Chinese commercial vessel, very few years old, you wouldnt believe the rudder fell off, bottom of the ocean, a few miles down. It is almost unheard. There is one rudder and one engine so you can imagine it is a significant issue. You can guess who built the ship, and you can also guess who have very firmly denied it is anything to do with them.

As to China generally their continued excursions into international waters and claims over territory in one of the busiest shipping routes will ultimately lead to conflict and must also be dealt with sooner, rather than later. It is a serious and under estimated issue by some.

I never tried to defend Chinese government but obviously it’s not easy to grasp that if you think you have monopoly to absolute truth. It’s simply pointless to argue. I know a broad range of pretty stupid politicians claiming (or even trying) “to do the best for the country” but unfortunately failing due to corruption, lack of knowledge or simply low IQ. Feel free to put Trump in any category.

I am not as convinced as you Apple will stay in China to the extent they currently are for various reasons.

Indeed; with such massive gross margins they could make the stuff in the US.

Well, getting Americans to assemble phones would be like getting Brits to pick potatoes (a specially trained and motivated workforce has to be flown in from Poland for the latter) but realistically they could move it to Korea. Or Japan.

Funny how the perspective of things varies. On a global scale, China has been the only one doing anything the last month and a half. Everybody else have been fighting over protective masks and all kinds of other protective medical stuff – all of it from China

I think one significant trend coming out of this crisis will be that companies will increasingly look to shorten supply chains. We have even seen in Germany that some are keen to pull back from manufacture in Italy let alone China. This may lead to some positive impacts on local manufacturing when that can be sensibly priced.

Peter wrote:

would be like getting Brits to pick potatoes (a specially trained and motivated workforce has to be flown in from Poland for the latter)

The thing behind the potato picking issue is that the farmers want to ‘pay’ their workforce partly (or possibly mostly) by providing on-site accommodation in a mouldy old caravan. This works for the seasonal migrant workforce, but the ‘Brits who won’t work’ already have somewhere to live and don’t want the caravan. The farmers don’t want to pay without making the caravan deduction.

JasonC wrote:

I think one significant trend coming out of this crisis will be that companies will increasingly look to shorten supply chains. We have even seen in Germany that some are keen to pull back from manufacture in Italy let alone China. This may lead to some positive impacts on local manufacturing when that can be sensibly priced.

I believe that such move can be beneficial for European economy.