July 7, 2012

Book Review: The End of Cheap China: Economic and Cultural Trends That Will Disrupt the World

An expose on how the rise of China will affect the American way of life.

"The End of Cheap China" is a fun, riveting, must-read book not only for people doing business in China but for anyone interested in understanding the forces that are changing the world.

Many Americans know China for manufacturing cheap products, thanks largely to the country's vast supply of low-cost workers. But China is changing, and the glut of cheap labor that has made everyday low prices possible is drying up as the Chinese people seek not to make iPhones, but to buy them. Shaun Rein, Founder of the China Market Research Group, puts China's continuing transformation from producer to large-scale consumer - a process that is farther along than most economists think - under the microscope, examining eight megatrends that are catalyzing change in China and posing threats to Americans' consumption-driven way of life.

I suppose for those who are outside China, we often wonder: Is China really doing well?  The author examines the topic of real estate from various angles – the policy flaw in terms of favoring the commercial zone as it is easier to obtain construction loans compare to residential and Chinese’s preference to hold tangible asset rather than stocks.  The author also examines GDP in China and he argues that unlike Japan, China’s infrastructure spending is more efficient and it helps to jump start the economy growth in the cities.  On the education front, Shaun highlights the classroom overcrowding issue (imagine a class size of 1,500) as well as the fact that the Chinese education system is not producing enough creative thinkers.

The topic interests me most is on China’s foreign policy.  Because of the need for natural resources, China has been actively expanding the influence to countries like Africa and Pakistan.  Different cultures adopt different policies when investing overseas.  When Chinese companies financially takes over a foreign company, the existing management team is often left intact.  Yet, not all countries trust China’s non-interference approach.  Some countries do not welcome China’s money.  Some struggle to accept China’s financial help.  Now I know why as a Chinese, I bond well with Pakistanis here in Singapore.  They seem to have a good impression of Chinese people, thanks to China’s friendly investment in Pakistan.

Rein takes an engaging and informative approach to examining the extraordinary changes taking place across all levels of Chinese society, talking to everyone from Chinese billionaires and senior government officials to poor migrant workers and even prostitutes. He draws on personal stories and experiences from living in China since the 1990s as well as hard economic data. Each chapter focuses on a different aspect of China's transformation, from fast-improving Chinese companies to confident, optimistic Chinese women to the role of China's government, and at the end breaks down key lessons for readers to take away. "The End of Cheap China" shows:

- How rising labor and real estate costs are forcing manufacturers of cheap Chinese products to close, relocate, or move up the value stream

- How a restructuring economy moving away from exports to domestic consumption, and rising incomes will create opportunities for foreign brands to sell products in China rather than just producing there

- How Chinese consumption will build pressure on the global commodities markets, causing both inflation and friction with other nations

- How China's economic transformation spells the end of cheap consumption for Americans
China's days as a low cost production center are numbered. "The End of Cheap China" exposes the end of America's consumerist way of life and gives clear advice on how companies can succeed in the new world order.

End of Cheap China is a good read, for those who wish to learn more about China from the inside.  The journal writing style makes it easy to follow.  Because the content of this book is filled with the author’s criticisms and opinions, it could get a bit disoriented.  This book at times appears to be written for the Western businessmen who are investing in China.  In other chapters, the author seems to address to the US government, to the Chinese government, to other governments, or to the Chinese people in China, on what they should or should not do.  

Each target audience – I would presume – has different agenda and potentially conflicting interests.  It is unclear if Rein’s goal is to advocate a win-win situation.  Personally I would prefer a straightforward journalistic approach such as Nothing to Envy (a book on North Korea).  

Having said that, End of Cheap China is also a business book and it is packed with action items for those who are doing business in China.

Hardcover: 240 pages

Publisher: Wiley; 1 edition (March 27, 2012)

ISBN-10: 111817206X

ISBN-13: 978-1118172063

Also available on : Flipkart, Amazon, Crossword, Landmark, Junglee.com

1 comment:

  1. Thanks Deepak for the objective review. I look forward to participating here on your site in debates on how China will affect rest of world. S. REIN