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China's Impact: Economy, HR Trends & Solutions for U.S.

Explore the rise of China and its implications on the U.S. economy and HR professionals. Discover the 2007 economy overview, housing market insights, and the challenges and opportunities brought by China's emergence in HR management.

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China's Impact: Economy, HR Trends & Solutions for U.S.

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  1. East Beats West The Rise of China & It’s Implications for the U.S. Economy & HR Professionals

  2. Two Goals • A Quick Overview of the 2007 Economy & U.S. Housing Market • Discuss How the Emergence of China Will Affect HR Professionals in the Coming Decades

  3. A Review & Preview of the U.S. Housing Market In Two Power Point Slides

  4. LAST YEAR

  5. THIS YEAR !!!!Reduced!!!!

  6. The 2007 Outlook • Falling Oil & Commodity Prices • Moderating Inflation • Low long-term interest rates & mortgage rates • A global economic boom • Asia on fire • Germany out of doldrums • Latin American Samba • The U.S. War Economy

  7. The 2007 Outlook • Soft Landing for the housing and auto sectors? • Maybe – the global warming effect • An endlessly resilient consumer? • Growth in the 1.5 to 2.5% range? • Depends on whether China will finance U.S. “twin deficits”

  8. The Budget Deficit

  9. The Trade Deficit

  10. The Chinese Dollar Dilemma • U.S. tax cuts put money directly in the hands of U.S. consumers • The Fed’s easy money policy coupled with Chinese currency manipulation stimulates a boom in re-fi cashouts • Flush U.S. consumers go to Walmart and binge on cheap Chinese goods • U.S. dollars build up in Chinese banks.

  11. The Asian Dollar Dilemma • Chinese recycle dollars back into U.S. treasury bills to prevent the dollar from weakening • Koreans, Japanese and Taiwanese forced to do the same thing • A flood of Asian capital keeps long term interest rates and mortage rates low • What happens when China stops accommodating our consumption? • Soaring interest rates & Inflation • Housing market collapse? • Recession?

  12. A China Primer

  13. China vs. the U.S. • Roughly same geographic area • Almost five times the population • Less cultivatable/habitable land

  14. The Chinese Economy • 10% GDP annually since 1980 • Economy has doubled three times • Over 100 cities with more than 1 million people

  15. The World’s Factory Floor • >70% of DVDs & toys • >50% of bikes, cameras, shoes, telephones • >1/3rd of air conditioners, color TVs, computer monitors, microwave ovens • Dominant in furniture, jeans, refrigerators, washing machines, underwear

  16. The “China Price”

  17. Weapons of Mass Production • Wages < $1/hr • Unemployment rate >10%! • 300-500 million peasants waiting in wings

  18. Industrial Network Clustering • Entire cities specialize in industry or segment • Leilu (bicycles), Yanbun (underwear), Hongmei (textiles) • Reduced transportation costs • Huge supply chain efficiencies & information externalities

  19. FDI • >$60 billion a year • U.S., Japan, S. Korea, Taiwan, Hong Kong • Latest technology = lowest cost production • Latest management techniques • Mercantilist aspects • Round tripping of capital • Lax regulatory environment

  20. China’s 21st Century Mercantilism I • Blatant currency manipulator • 20-40% undervalued • Flagrant violations of WTO • Export subsidies • Cheap energy, land, capital

  21. China’s 21st Century Mercantilism II • Counterfeiting & Piracy • The World’s Pirate Nation • Not just DVDs and Louis Vuitton • Environmental & Health/Safety Standards • World’s most polluted nation • World’s most dangerous workplace

  22. The Environmental Scorecard I • 16 of 20 most polluted cities • Largest SO2 emitter • Second largest CO2 emitter • ¼ of mercury pollution • Regional: Acid rain • Global: Chinese “chog”

  23. The Environmental Scorecard II • 70% of rivers polluted • Half of population exposed to water contaminated by human waste • Liver & stomach cancers an epidemic • Red tide rising

  24. The HR Nightmare

  25. China’s March Across the Value Chain • Assembly • Production • Design • R&D

  26. China’s March Up the Value Chain • Tube socks • TVs • Autos • Biotech & Pharmaceuticals • Aircraft & Shipbuilding

  27. HR Implications • Permanent Wage & Job Shocks • Depressed wage levels for several decades • More Limited Job Opportunities • Less permanent employment • Even “local” industries like real estate at risk

  28. Solutions? • U.S. lives within means • China abandons mercantilist policies • A day of reckoning is likely ahead • Don’t fall in love with China!

  29. The Well-Timed Strategy • Sign up for the free weekly newsletter at: http://www.peternavarro.com

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