The End of Cheap Labor in China

Slashdot links to this article, that goes inline with this recent forecast.

In what is supposed to be a land of unlimited cheap labor — a nation of 1.3 billion people, whose extraordinary 20-year economic rise has been built first and foremost on the backs of low-priced workers — the game has changed. In the past decade, according to Helen Qiao, chief economist for Goldman Sachs in Hong Kong, real wages for manufacturing workers in China have grown nearly 12% per year. That’s the result of an economy that’s been growing by double digits annually for two decades, fueled domestically by a frenzied infrastructure and housing build-out — one that, for now anyway, continues apace — combined with what was for a time an almost unquenchable thirst for Chinese exports in the developed world. Add to that the fact that in the five largest manufacturing provinces, the Chinese government — worried about an ever widening gap between rich and poor — has raised the minimum wage 14% to 21% in the past year. To Harley Seyedin, president of the American Chamber of Commerce in South China, the conclusion is inescapable: “The era of cheap labor in China is over.”

 

China is coming

These days, when discussing globalization with my friends, the discussion often touches upon China.  And more often than not I hear skepticism when suggesting that China’s role is becoming more important and more influential.  While I am of the opinion that China is in its early stages of being a global superpower, many people seem to believe that China has some sort of limitation that it won’t ever overcome.  The mass production of cheap, low quality goods seems to be the sky’s limit.  I strongly disagree with that.  I’ve read and heard plenty about the quality of Chinese production going up.  And I don’t believe that China is limited by cheap labor alone.

Today, I read an article in GigaOm about Chinese geeks, who have studied and worked in US.  Many of them, it seems, are going home to start business in China.  Here is a quote form the article:

In China, the red-hot tech scene seems dominated by a small group of entrepreneurs who paid their dues in Silicon Valley before returning home to create successful Internet and software startups. Aside from finding fame and fortune, these “returnees” are also laying the foundation for a startup culture that will allow grassroots entrepreneurs to flourish as well.

Returnees — Chinese nationals who studied or worked the U.S. — head up just 3 percent of all tech companies in China, yet they represent nearly 70 percent of all startups that go public in the U.S. market (still the largest measure of success in the industry), according to an internal study by Palo Alto, Calif.-based venture capital firm GSR Ventures, which deals exclusively in China. The firm also found startups created by returnees were much likelier to become financially successful and hire more employees than startups founded by Chinese entrepreneurs who never worked in the U.S.

On the same note, I’ve heard similar things about India too.  You don’t have to know too much about Indians in technology – look at some conference presentations from Google, Yahoo or Microsoft.  Half of the people speaking will be of Indian decent. And one day some of them will go back to India to start their own business too.  Still think that China and India will serve the world with cheap labor  and call centers for the eternity?

 

Insight into Google’s free expression decision making

I am fast to skip lengthy blog posts, but this one – “Free expression and controversial content on the web” – in the Official Google Blog somehow hooked me from the first sentence:

Our world would be a very boring place if we all agreed all the time.

What followed was a lengthy insight into what Google people have to deal with on an every day basis, how they have to balance between what they want, what their customers and users want, and what different governments want.

At Google we have a bias in favor of people’s right to free expression in everything we do. We are driven by a belief that more information generally means more choice, more freedom and ultimately more power for the individual. But we also recognize that freedom of expression can’t be — and shouldn’t be — without some limits. The difficulty is in deciding where those boundaries are drawn. For a company like Google with services in more than 100 countries – all with different national laws and cultural norms – it’s a challenge we face many times every day.
In a few cases it’s straightforward. For example, we have a global all-product ban against child pornography, which is illegal in virtually every country. But when it comes to political extremism it’s not as simple. Different countries have come to different conclusions about how to deal with this issue. In Germany there’s a ban on the promotion of Nazism — so we remove Nazi content on products on Google.de (our domain for German users) products. Other countries’ histories make commentary or criticism on certain topics especially sensitive. And still other countries believe that the best way to discredit extremists is to allow their arguments to be publicly exposed.

Google’s globalism (reminder: more than 100 countries), and the scale at which they work (for example, Google is often called the duct tape of the Web) are unprecedented.  Being a pioneer surely has its bright sides (like money and power), but it also brings a lot of responsibility and a total or partial lack of established practices.

Dealing with controversial content is one of the biggest challenges we face as a company. We don’t pretend to have all the right answers or necessarily to get every judgment right. But we do try hard to think things through from first principles, to be as transparent as possible about how we make decisions, and to keep reviewing and debating our policies. After all, the right to disagree is a sign of a healthy society.

One thing I’m glad about is that I don’t have to make decisions balancing between people of different cultural backgrounds.  As much as I want to be an all satisfying nice guy, the reality is that I see the world in black and white more often than I should or want to.  On more than one occasion I was very critical and practically insulting to a person who has a different point of view on some subject that I’m passionate about.

The World Is Flat

The World Is FlatI have just finished reading the book by Thomas Friedman “The World Is Flat“.

As you’ve probably noticed I am not a big book freak. I rarely read anything outside of very technical literature. But I felt that I absolutely had to read this one.

I ordered immediately after I saw this video, which is Thomas Friedman’s speech in MIT, in which he talks about the globalization and the flat world. Basically, what he did in MIT, was a very quick and brief overviwe of the first three chapters of the book. His speech was amazing. He was talking in very simple language about really complex things. He made a lot of stuff so much easier to understand. And he made some really interesting connections.

I have to say though, that many of the things he was talking about weren’t new to me. I was thinking about them myself. I just couldn’t possibly form them into any shape or express them in any understandable form.

Friedman did very clearly. And he introduced a lot of examples. And he added a lot of credebility to what he was saying by interviewing a whole lot of smart people.

While the book is written in a very simple language and with a lot of examples, it was difficult to read for me. It was so thought-provoking that I had to stop about every two or three pages for an hour or a day to re-think everything I read. It took me alsmot two month to read 470 pages. And I am sure I’ve missed a lot too. I’ll have to re-read it in the near future.

This is the most complete and wide view of globalization that I have come across. Ever. The book doesn’t just talk and talk about some abstract forms. It shows the very specific connections between events that happened throughout the human history, with more focus on the last 30 or so years. All events and connections are looked at from a multitude of angles – political, economical, cultural, technological. Each of those angles is futher down broken into a multitude of options. Examples from American, Japanese, Chinese, Indian, African, and European cultures are given. Interviews were conducted with a whole lot of people from ex-presidents and current ministers to CEOs of international corporations to religious leaders, as well as plenty of common people from a multitude of backgrounds.

Globalization aside, this book is the best piece of journalism that I’ve read in a long long while. A job well done. Truly a bestseller. I would seriously recommend this book to anyone. Yes, to anyone. Not only people who are interested in globalization, but to all people who are interested in their own present and future. There are lots of questions, and there are lots of answers. You’ll surely understand the world better after reading this book.

I do.

The World Is Flat

This video is off a smart guy talking to MIT crowd about globalization. The speech is titled after the book he wrote – “The World Is Flat“. This is the most interesting speech on the subject of globalization that I’ve ever heard. It’s very widely scoped too – it touches on everything from Berlin wall and Netscape browser to 9/11 and open source. I’ll be ordering the book shortly too.

The speech is in Real Media format and is about one hour long, so you might want to install Real Player and find a large piece of time, if you plan on watching it.

After I saw it, I was somewhat tired. The speech is very thought provoking and it made my brains work hard. Packing it all into my head felt like dealing with a wardrobe of clothes and a tiny bag. Things were falling out of it all the time and I couldn’t manage the zipper to close.

Rarely I feel like this.