March 21 2007: It is not Osama that threatens US the most; in fact it is the fear to match Chinese prices that scares most the US industry. Whether it is furniture manufacturer or garment manufacturer, electronics manufacturer or you name it- it is Chinese brand every where. Result of this is that Walmart sources more than 45% of its entire purchases from China.

Best or worst part- depending upon from which side you see it, every year, Chinese prices as a rule are coming down by about 30%. As a result many trade segments are entirely dominated by Chinese products and Chinese economy has grown by at least 300 percent since 1980s; outperforming Hong Kong, Korea, Taiwan, and Japan even in their economic heydays.

China’s conquering of various trade segments essentially emerges from their ability to set the price for rest of the world to match. Chinese manufacturers offer significantly reduced prices over the one offered by foreign competitors and as a result China has captured more than 70% of the world’s market for DVDs, toys, bikes, cameras, shoes, telephones, air conditioners, color TVs, computer monitors, luggage, microwave ovens; and the list is ever growing.

China has been able to develop this capability to drastically reduce the prices mainly because of low wage rate, disciplined work force that delivers high quality output, non-unionized work force and not to forget catalytic role of foreign direct investment.

On the fillip side, scant regard for health and safety provisions, non enforcement of environmental regulations and enforcement, coupled by elaborate, government-sanctioned system of counterfeiting and piracy, and protectionist trade barriers have all contributed to this growth in Chinese industry. Most workers and even qualified engineers get paid at a tiny fraction of what their counterparts in other countries get. Not surprising, people from china make the largest segment of immigrant applicants to west and any Chinese employee who once gets posted abroad does his very best not to return to his home land. Most companies pay their workers far less than the stated minimum wage set by the government sometimes well below a US dollar per hour.

Another major reason for growth in Chinese exports is gross undervaluation of Chinese currency. China has largest number of educated unemployed in the world and despite its growth, this list is expected to grow and not shrink since the state sector is shrinking fast. In case, growth in Chinese economy slows down, unemployment and consequent political discontent will skyrocket.

Still to its credit, despite equally blatant disregard of wage rate, health or environment standards in western Asia in Indian sub continent, none of these countries can compete effectively with China.

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