Thursday, January 06, 2005

Will China Escape from Walmart?

The North American steel industry is suddenly starting to notice China. During the past year steel prices have been high. However, projections are that this will change and the marketplace may soon become much more competitive. Part of the explanation rests with China.

Industrialization has been proceeding at such a pace in China that its needs for steel had significantly outstripped it's domestic production capacity. It was a welcome customer on the world market. However, two factors will soon change that situation in dramatic ways.

On the one hand the explosive rate of industrial expansion in China is starting to level off. Added to that is the fact that the Chinese government has recently approved expenditures of 4.5 billion dollars (US) for the expansion of two of its major steel production operations. Guess what? China is about to go from being an net importer of steel to a major exporter of steel.

If the North American steel industry is surprised by this it shouldn't be! It is a natural development that was virtually inevitable.
When I was a kid everyone complained that low end consumer goods were all "Made in Japan." Well, that's not the case any more. Now Japan supplies us with electronics, industrial technology and automobiles.

Today people are complaining that everything in stores like Walmart is "Made in China." Don't worry about it. It won't last forever. I predict that though their reserves of cheap labour will gradually disappear that they will move on to bigger and better things.

I have many reservations about China's approach to civil rights and they face an immense challenge simply to feed and house their vast population adequately. However, I remain impressed by their industrial ingenuity and tenacity. I expect that before long China will escape from Walmart.
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