Change is happening all over the world, but mostly in Asia. Whole cities are rising up, like mushrooms, from the good earth of the middle kingdom. Whole populations – hundreds of millions of people – are on the move, from country shanties to in-town tenements. Whole new industries are waking up to a New China, with a middle class…and millions of rich people too. It is the greatest leap forward ever! China’s auto and truck exports alone are set to grow by 46% this year.
We spoke to a young man here who believes that the key to making money in large US companies actually lies in Asia.
“US companies aren’t going to make much money by selling more product to Americans. Americans don’t have any money. As you keep pointing out, US wages haven’t gone up in a long time…and they’re not going to go up either – because that’s the other half of the equation. A company with a good product – especially a good brand – can make a lot of money now by doing two things. One is lowering its costs by outsourcing labour to Asia…not just manufacturing, but even high-level things like design, research, marketing, legal work. The other thing it has to do is to sell its products to this huge rising market of the Asian middle class.
“If it does these two things, it will have lower costs and higher revenues. If it doesn’t do these two things, it will be stuck with high costs…and a stagnant market – at best. Actually, as the housing problem deepens in the United States, you’d expect domestic sales to fall.”
“Mortgage troubles here to stay,” reports the Minneapolis paper.
He’s probably right. While the average American will probably grow poorer – in both relative and absolute terms – many US companies will probably do quite well. Many already are.
The Daily Reckoning Australia