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'Made in China' labels don't tell whole story
By David Barboza (The New York Times)
Updated: 2006-02-09 11:50


SHENZHEN - China: Hundreds of workers here at a huge factory owned by the Japanese company Hitachi are fashioning plates of glass and aluminum into shiny computer disks, wrapping them in foil. The products are destined for the United States, where they will arrive like billions of other items, labeled "Made in China."

But often these days, "Made in China" is actually "Made by Someone Else" - by multinational companies from Japan, South Korea and the United States that are using China as the final assembly station in their vast global production networks.

Analysts say this evolving global supply chain - which often tags goods at their final assembly stop - is increasingly out of step with global trade figures, which serve to inflate China into a bigger trade threat than it may actually be.

That kind of distortion is likely to appear once again on Friday, when the U.S. Commerce Department is expected to announce that America's trade deficit with China swelled to a record $200 billion last year.

It may look as though China is getting the big payoff, but over all, the biggest winners are consumers in the United States and other rich countries, who have benefited enormously from China's production of cheaper toys, clothing, electronics and other goods.

At the same time, U.S. multinationals and other foreign companies, including retailers, are big winners, because they are the largely invisible hands behind the factories pumping out inexpensive goods from China. And they are reaping the bulk of the profit from the trade.

"Basically, in the 1990s, foreign firms based in America, Europe, Japan and the rest of Asia moved their manufacturing operations to China," said Yasheng Huang, a professor at the Sloan School of Management at Massachusetts Institute of Technology. "But the controls and therefore profits of these operations firmly rest with foreign firms. While China gets the wage benefits of globalization, it does not get to keep the profits of globalization."

To the extent that there are any real losers, they are mostly lower-wage workers elsewhere, like the ones at Hitachi, who lost their jobs in Japan, along with workers in other parts of Asia and in the United States who suffered as employers began relocating factories to China. Indeed, despite the big shift to China, U.S. imports from Asia as a whole have hardly changed in the last 15 years.

Factories in Taiwan used to assemble the world's computers; now Chinese mainland does. Hong Kong garment workers used to stitch tons of fabric into finished clothing; now Chinese workers do. And Japanese plants once manufactured the world's most popular consumer electronics brands, like Hitachi, Sony, Panasonic and Toshiba; now many of them are shipped from Chinese ports.

In fact, about 60 percent of China's exports are controlled by foreign-financed companies, according to the latest Chinese customs data. In categories like computer parts and consumer electronics, foreign companies command an even greater share of control over the exports, analysts say.

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