Wednesday, March 11, 2009
China as a market - Where are the Sino-dollars?
China has a migrant laborer population. China needs to build infrastructure. The populace doesn't have the money to spend; the state owns the businesses and as such makes all non labor profits. So selling consumer goods to China is difficult. Amtrak should be able to sell them train infrastucture... there is a company in Montgomery, Alabama that is called Kershaw Mfg. They build maintenance machinery for railroad track. China ought to buy their stuff and Caterpillar etc, instead of iron to make their own steel. In a global sense they are engaging in vertical integration (a kind of monopoly where a business holds all production from raw material to market.) We need to educate them about comparative advantage globally and in their own markets. The United States has comparative advantage in food production, but the places that need it don't have the money. Meanwhile we pay farmers NOT to grow food at times, in order to avoid a glut in the market. In the case of China, our rice isn't the kind they like. Texmati rice I know from experience is not as good as Indian Basmati. We should buy basmati seed and grow it here or compete by improving on it where the camparative advantage in growing it is. Tropical climes are better, so either we need to develop better rice in North America for sale to China and Japan, OR we need to farm that out where the comparitive advantage exists. Introducing them to wheat and corn would be another way to go. Chinese might love Mexican food in the right context... it's dirt cheap and makes for good staples.
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