The China Price

The China Price: The True Cost Of Chinese Competitive Advantage tackles a common issue, the migration  of manufacturing to China, without covering too much of the same ground previous books have trod. One aspect I appreciate in particular about this book is how the author Alexandra Harney combines  personal stories of the lives of every day Chinese people with high level views of larger issues.

The main question is book asks is in its subtitle – what is the true cost of Chinese competitive advantage? As Americans we see the cost of goods coming out of China as the sticker price, the amount of money that we have to pay to get that good. This price is lower than the price we would pay if the good was produced in America. Economists call the costs we don’t see externalities. Harney argues that the cost of Chinese manufacturing is much higher than realized because there are so many negative externalities involved.

For an example think of a town wanting to build a power plant. They have the option to build a coal plant or a solar plant. Per unit of energy the coal plant will cost half as much (this is the regular cost) so the town chooses to build it. They realize later that the coal plant also creates smog around the city that the solar plant wouldn’t have. This smog is considered an externality, it is a cost from choosing the coal plant that isn’t obvious up front.

Harney goes into a lot of depth about the different manufacturing costs often over looked because they are payed by the Chinese themselves.  The cost to the environment of China is staggering. From factory chemicals being dumped directly into rivers to carcinogenic smog roiling out of millions of factories, the Chinese drive for GDP growth is destroying their country. The traditional societal makeup of Chinese familes is being stretched to the breaking point. Rather than extended families living together for their entire lives, parents and children both leave villages accross China for the manufacturing hubs on the coasts to support the family they rarely see. These migrant workers move hundreds of miles away from their families and friends then to work long hours in dangerous, uncomfortable factories. The cost to the psyche of a communist nation being thrown into an amazingly laissez faire capitalist marketplace is seen in the restless population and neurotic government.

I believe this book gives perspective to the loss of manufacturing in America and shows why the Chinese are able to do work for so much cheaper than Americans. The current state of affairs can not last forever, but how China grows past this economic stage is still a question they are attempting to answer.

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