40 Cents an Hour
China's low wages have been the main catalyst for its manufacturing boom. The population of 1.3 billion, the world's largest, provides an almost inexhaustible supply of low-cost labor. The average factory wage is about 40 cents an hour -- one-sixth that of Mexico and one-fortieth what U.S. factory workers are paid.
China's total trade -- imports and exports -- was $510 billion last year, nearly 15 times greater than in 1980. Forty-one percent of the exports went to the United States. China recently supplanted Japan as the country with the largest trade surplus with the U.S. Last year American purchases of Chinese goods were $83 billion greater than Chinese purchases of U.S. products.
Wal-Mart Stores Inc., the world's largest retailer, bought $14 billion in merchandise from China last year -- 13% of all U.S. imports from the country. To be closer to its suppliers, the company recently opened a worldwide purchasing center with 300 employees in the southern city of Shenzhen.
On U.S. shores, the torrent of Chinese merchandise has been both bane and blessing.
To the delight of budget-conscious shoppers, retailers have filled their shelves with inexpensive Chinese-made goods, many of them bearing such brand names as Black & Decker, Stanley and Rubbermaid. The low prices of these products have helped keep inflation in check and bolstered the bottom line for many U.S. companies.
Trade with China has created millions of jobs for U.S. lawyers, marketers, shippers, truckers and others.
The trade-off is in U.S. factory jobs. In one industry after another -- clothing, furniture, light electronics -- domestic manufacturers unable to match Chinese prices have gone out of business or shifted production abroad. A recent study done for a congressional panel found that at least 760,000 U.S. manufacturing jobs have migrated to China since 1992.
Scheu Manufacturing Co. of Rancho Cucamonga sells portable industrial heaters. Until two years ago, it made all its products in Southern California. Today, it imports two-thirds of them from China. The change eliminated 130 seasonal jobs at Scheu.
"We've always prided ourselves on being a low-cost producer, because of the quality of our engineering," said Craig Scheu, a principal in the family-owned business. "The next thing we knew, not only were we not competitive, we weren't even in the ballpark. It's stunning the prices they can do."
China's emergence has been a mixed blessing for developing countries as well. Hong Kong, Taiwan, Singapore and the Philippines have lost thousands of jobs, in some cases entire industries, as production has moved to the Chinese mainland.
Mexican factories that once supplied the United States with golf clubs, blue jeans, door locks and other products have closed by the thousands over the last two years as China has taken their business.
At the same time, China's purchases of raw materials and equipment to power its export sector have bolstered Asian economies weakened by the slowdown in the U.S. and Europe.
The struggle for control of the U.S. bicycle market illustrates China's raw manufacturing muscle.
As recently as the mid-1990s, more than half the bicycles sold in the United States were made in U.S. factories. Manufacturers had survived low-cost competition from Taiwan, Japan and South Korea.
Then bicycle makers moved their assembly lines to China.
"Within a couple of years you had [factories in] what had been dirt fields churning out a half-million bicycles [each]," said Michael Kershow, a Washington attorney who represented major U.S. manufacturers in a failed attempt to secure trade protection.
U.S. companies could not match the Chinese prices. Chinese imports now dominate the market, accounting for nearly 85% of the 16.8 million bicycles sold in the U.S. last year. The share of U.S.-made models has dropped to 2%. Venerable American brands such as Huffy and Schwinn now are made abroad.
The U.S. bicycle industry lost an estimated 8,000 manufacturing jobs. Asian countries that saw their shares of the American market shrink also lost jobs. But U.S. consumers saved billions of dollars as the average price of bicycles sold through mass retailers such as Wal-Mart dropped from more than $100 to $77.
"I don't know how [Chinese manufacturers] deliver a ridable bicycle for 70 bucks, but they do," said Fred Clements, executive director of the National Bicycle Dealers Assn., a trade group with headquarters in Costa Mesa. "The low-end bikes are as good as they were when they were made in the United States. Only the prices have dropped."
Opening the Market
China's rise was made possible by a convergence of political and economic forces. Under Deng Xiaoping, China's Communist leaders began dismantling the centrally controlled economy and encouraging private enterprise in the late 1970s. The move toward a free market accelerated in the late 1980s as the Soviet Union teetered toward collapse.