Understanding China, One Blog at a Time

An American in China

Comment on the State of Chinese Construction

Posted by w_thames_the_d on October 7, 2011

Here is a nice observtion from Brewskie on the state of Chinese manufacturing.

“Tofu bricks crumbling in the hands, nice. (Makes me wonder if they put if they put this in tofu dishes. :P )
Anywho, this good chap said this to me today:
“This is exactly the case! I have been traveling to China since 1997, lived there full time from 04-06, moved back to the States for a while, and live in Shanghai currently. Everything built here is a facade.
I travel all over to China on business visiting vendors. They are all panicking right now. They will say and promise ANYTHING to get the business, only to short specs or substitute cheaper materials in order to stay alive. The inflation pressures and overcapacity in most industries are squeezing them to death at the margins. So they figure they only have 6 months to a year to live anyhow, so what difference does it make if they sell you crap and at least make a bit of money before they go.
As an example, I was talking to one of our vendors who buys extra steel from the local construction site. They are supposed to use 11mm steel reinforcement rod in the concrete, but they pull up the wire stretcher and take it down to 7 or even 6mm, then they sell the rest. This type of “cost down” is rampant in all their construction and products. It’s almost impossible to catch until it’s too late.
So while ObaMao may be a bit over the top in his social criticisms of China, he’s dead on about the end result. This place is getting ready to kill itself (each other) for a buck. There is no social contract outside of family and friends. There is very little loyalty to the customer. I know that our products have seen serious quality problems in the past 6 months. I suspect anything “Made in China” is going to see this at retail soon (holiday season). The Wal-Marts of the world who won’t allow for cost increases are forcing the Chinese to cost down or die. So while I don’t fully blame the Chinese, the end result will be the same.
That infrastructure is going to be worthless or dangerous in just a few short years. That means the ROI on all that investment is going to be horrible. This is what’s going to drag China down in the long run. Misallocation of funds, bribery, corruption, embezzlement, shorting specs and materials, and learning to only worry about the next quarter from us have done a number on the place.
It’s anyone’s guess how long it can go on (since it’s a command economy), but it will eventually give up and change a lot from how it is now. They soon will no longer be seen as the economic savior of the world.”

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