China says it is building its second aircraft carrier.....

It is more then that, but many things in China are making investors nervous.

The reports of almost slave like conditions, acts of sabotage by workers, intellectual theft, out of control piracy and accounting irregularities, not to mention the increasingly agressive movements of their military are making a great many companies rethink their relationship with China. I have long thought that if a US Administration was brave enough to allow a tax amnesty for US companies on returning overseas money to the US as long as it was reinvested in creating manufacturing jobs domestically, a huge amount of money and jobs would flee China and other countries and return to the US where it belongs.

I bet most people have no idea that there is over $1.7 trillion in US money sitting in China. But this money is not held by the Chinese, it is held by US corporation that operate there. When profits are made in overseas locations like in China, they money is trapped because the US puts huge tax penalties on such money. This is why companies like Apple simply use these profits to expand facilities overseas, they can't do anything else with it. And many other countries assess fines and penalties to remove the money, meaning that if these companies wanted to bring it to the US, they would have nothing left after paying off 2 countries to move their money.

And no, it is not unique between the US and China. This is why decades ago Japan had a lot of companies set up subsidiaties in the US. Manufacturing here in some was cheaper then building there and shipping over. So they set up US companies owned by the parent company, and the money made in the US stayed in the US. But as the years went on, it became harder and harder to do, and for the last decade the trend is reversing. Japanese plants closing and moving back to Japan.

From 1974-2009, the Honda Goldwing was made in the US, for the US market. But changes in economies and an increase in overseas sales of what had for decades been seen as a "US Bike" saw the Ohio plant close in 2009, and the entire factory moved to Japan for the 2011 model.

 

I haven't been inside a Sears store in probably six years but the last time I was I noticed a sign in the tool department warning that not all tools that are sold as "Craftsman" are actually USA made Craftsman tools that have a life time warranty. The sign said, if it doesn't have USA on the tool it's a generic Carftstman with no warranty.

There are still some high quality tools out there like real Craftsman, Snap-On, Greenlee, Klein, etc. but they aren't cheap because if you want quality you have to pay for quality.

But today if you're Generation-X it's likely you don't know what quality is or have forgotten what quality is and the Millennial Generation are clueless what quality is, all they are concerned with is the price tag.

Look at todays clothing found in the stores today, all cheap, low quality. Some years ago I was digging through a box in the garage and came across a pair of Levis I purchased in 1972. I looked at the stitching and compared it to the stitching of a recently bought pair of Levis. Todays stitching would have been rejected by QT forty or so years ago and the thread count of todays clothing isn't what it use to be. Back during the 50's, 60's, 70's a pair of Levis weren't broken in untill they went through the washer six times. Today you're lucky if a pair of Levis even last six washings.

The problem is, Americans no longer demand quality but want cheap stuff and that's been a boom for China and globalization.

 

Just a quick comment- since this is a subject that I am actually knowledgeble about- in general- working conditions in China NOW are pretty decent- not that I would want to have to be subject to them- but 20 years of Western pressure and economics have changed the labor environment there.

Even 15 years ago, workers were almost peons- they needed 'workers' cards which factories could hold and which would make it almost impossible for workers to change employers- that has virtually disappeared- companies compete for labor in China- driving up salaries, and working conditions. There are industries that have nastier working conditions- mostly the 'old' industries like steel, but the modern industries are quite similar to the U.S. when it comes to 'working conditions'.

This is not so much the concern for Western countries in China anymore- that is an issue they worry about more in places like India and Bangladesh.

All of the rest of the issues you raise- certainly.

 

Not just America- really the world- and it is basic consumer capitalism at work. Everyone claims that they want quality but even within what someone considers 'quality' we tend to look for the cheapest price. Human nature. And that drives the competative need to find the cheapest place to source the items- even quality items.

 

Tell you what. Do some research into the conditions at Foxconn, and get back to me.

Average wage is well under $20 a day, they work 12 hour shifts, and live in company dorms. Complete with military security guards, and whistleblowers who tried to expose the large numbers of toxic spills and hazards have often died due to said toxic contaminations. And many literally live in "debt slavery", where they owe more to the company for food and housing then they are owed in wages.

A couple of years ago I worked at a company that imported many of it's items from China. And several times they rejected a company not because of cost, but because of their poor reputation of worker treatment. The information of how workers are treated in China is not a secret to those who take the time to research it.

http://www.facing-finance.org/en/database/cases/working-conditions-in-foxconn-factories-in-china/

http://www.wired.com/2015/04/inside-chinese-factories/

http://phys.org/news/2015-10-despicable-conditions-china-iphone.html

http://chinalaborwatch.org/home.aspx

 

I am well aware of Foxxconn.

I don't want to go into great detail but I do know what I am speaking of. First hand. Foxxconn was an anomaly- and companies are not avoiding China as a source country because of it- rather they are reviewing the standards that they require.

That there are even watch dog groups monitoring factories in China now is a huge improvement. One of the biggest problems Chinese manufacturers have now is finding employees- they are competing with each other- and with 'easier' i.e. more comfortable jobs that often pay less but have more 'prestige' than working in a factory.

Wages are still low by our standards- but improved dramatically from 15 years ago- and almost all of that is because of both demand- and pressure by Western buyers.

 

But there are many people who want quality but don't know what quality is.

I'll go out for dinner at Ruth Chris Steak House and have no problem paying for quality, a $80 steak dinner with a 10 oz. prime cut ribeye steak.
While others are more concerned with quantity and head to Denny's and pay $8. for a 16 oz. choice cut so they claim T-bone steak.

I'm old schooled, when it comes to firearms it's quality. If it's a bolt action rifle, it has to have a Mauser action and they are expensive to manufacture.
I want milled steel not stamped steel receivers that AR's and AK's have. A hard wood stock, not plastic.

Look at cars, you back into a post in a 55 Chevy and there might be a dent in the bumper. Back into the same post with todays cars, you are looking at a thousand dollars worth of damage.

 

Actually, each of the 4 references I made described such conditions at 4 different companies. Not just Foxconn.

But it is making decisions among many companies. When we needed custom boards for our equipment, we picked a company from Taiwan for some, India for another. And when they needed a 24 hour call center, even though the bid from a company in China was lower, they picked instead to go to India.

Most contracts for things like that are 4-6 year contracts. And these announcements of the conditions in China only started to come out about 2 years ago. I am expecting a butterfly effect in the next 3-5 years, as contracts come up for renewal, and their US owners instead decide to not extend them, but move elsewhere.

We did still pick a company from China for the wiring equipment, but it was a smaller company, with less government control and much better conditions. Ironically, in China it is the larger companies that have the worst problems, not the smaller ones.

 

I deal with a lot of factories in China- and India and other parts of Asia- and have for years.

From my personal experience, and from reading the reports of our third party inspectors, conditions in China have improved dramatically- and from my experience- workers in China in general- have better working conditions than in the other parts of Asia- or to be more specific- the lower cost Asian countries- Korea and Taiwan are both more expensive and have better working conditions.

Call center in India? Somewhat a no brainer there- a bigger base of English speakers- less of a cultural or language barrier- and call centers don't have to deal with the logistical problems of India that manufacturing does. Frankly, I prefer to source from China rather than India for a variety of reasons- among them that India has more of a problem with child labor than China does.

Anyway- no I would not want to be a factory worker in China or Vietnam or India- BUT compared to being a factory worker in China 10 years ago- it is night and day better.

 

Looks like the Chinese are improving with innovation. They should also invest in ways to improve productivity by improving the working conditions of their work force.

 

Considering chinese past history in military plateform design, they'll probably quit this new carrier half-way through construction then start two parallel project which they'll also abandoned half-way before going back to the original one but lenghtning it by 2 feet and painting it a different color and calling it a brand new innovative design...

 

That is actually par for the course for China.

Although they are getting better. All of their new classes of Destroyers being built are all a single model, the 52D. Unlike a handfull of years ago, when they were building the 51C, 52B, 52C, and 52D all at the same time.

Oh, and also completing the building of some Sovremenny class ships they bought unfinished from Russia.

Anybody that studies the Chinese military procurement system sees a long line of failed prototrypes and unacceptable equipment, that more often then not falls into a black hole and is replaced before it is ever fielded.

The US on the other hand fields a single class of Destroyer, the Arleigh Burke. A single class of Cruiser, the Ticonderoga. However, for some reason we retired all of our frigates.

 

Maybe because a bunch of your allies/dependant, like Canada, already have frigates available when you need them for patrol like you did near somalia and the med... In fact we only have frigates now in Canada and our soon to be built armed support tender to replace the derelict HMCS Preserver and HMCS Provider. The last two destroyer we had, the HMCS Algonquin and Iroquois have been scrapped years ago after multiple refit.

 

The main role of frigates is early air warning and anti-submarine work for our Carriers and other battle groups. Our task forces generally do not operate with ships from other nations.

Sorry, this makes no sense. When was the last time we had Canadian Frigates defending our CVNs?

 

Eh, it was only a theory...

Oh, and the last time, maybe Korea.
Before that maybe if you had some carrier operating in the atlantic during WW2 since Canada had quite an ASW corvette fleet at the time. Because of those we ended up being the 3rd biggest navy at the end of WW2...