China is set for some interesting times. For the last 6 years or so, Beijing has been demanding a role in world commerce commensurate with its stature and power. Careful what you wish for. China’s academics and wonks have long talked about the need to move away from low-wage factory work – but now they have to figure out what comes next.

The Taiwanese are Voting with their feet:
FoxConn concedes on higher wages, but also makes noises about leaving town. The normally tight-lipped Taiwanese firm leaks plans to pull over three quarters of a million jobs from Shenzhen and go to cheaper parts of China or Vietnam. FoxConn is a Taiwanese firm (subsidiary of HonHai) with deep roots in China’s manufacturing sector, so if they make good on the threat to leave town we can expect lots of others to follow them.

Foreign partners feeling labor pains
Honda and Japanese manufacturers are becoming enemies of the revolution . A series of quick, headlining-grabbing wins in the struggle for higher wages, safer workplaces and greater respect may turn out to be pyrrhic victories for China’s working-class heroes and the bureaucrats who say they love them. Xinhua and Chinese officialdom may have been a bit too quick to jump in on the side of labor rights. The People’s Daily has been dusting off its old-school revolutionary credentials, extolling the courage and gumption of the honest gongren toiling under Japan’s yolk – but these are wildcat strikes that largely avoid the official trade unions. Sure, it’s fun when the foreign managers are squirming – but what to do when the same righteous outrage manifests at the SOEs and Chinese firms?

Google vs. China II: Back from the dead -
Google is back to bite Beijing in the butt. In a passive-aggressive two pronged offensive, Google is simultaneously filling out paperwork in both Beijing and western trade offices. Google is applying for rights to continue their online Chinese map services and trying to make censorship a WTO issue The Big G may not know China, but they sure do know about bureaucracy and lawyers. This could be a long, low-intensity struggle that Beijing will lose even as it wins.

Head in the cloud, feet behind the firewall
A survey of 900 internet experts conducted by Elon University predicts that most of our business computing will take place in the ‘cloud’ of online hosted applications within the next few years – which will work just fine as long as you have ubiquitous, unfettered access to sites and servers distributed around the globe. This confirmed that the momentum of cloud computing is building up speed just as Beijing published its manifesto on China’s internet policy – reinforcing its sovereignty over Chinese online space. I’ve been asking around how CTOs and CIOs plan on reconciling the two trends, but no one seems to know enough to make a definitive judgment. It’s a good thing that risk-management has become passé, because this seems like one of those disasters in the making that sensible people are supposed to see a mile off.

Inflation
Beijing would like nothing more than to sit back, enjoy the Expo and go into cruise-control mode while the rest of the world economy gradually perks up and starts placing orders with Chinese factories again. But with Chinese inflation hitting record levels – and that’s BEFORE the new wage increases stoke the fire – Beijing is feeling the heat.

Currency
Even Geithner is starting to talk tough on currency. This is exactly the kind of issue that China needs to avoid – it’s like a glacier slowly but surely grinding up the country-side. Too big to stop, but so slow you don’t notice the danger until its too late. China has already missed several opportunities to talk this away with high-minded rhetoric and empty promises. Odds are it will get folded into a laundry list of WTO complaints just as China is feeling constrained by inflation and unemployment issues.

China has grown used to getting its own way in international power-politics, but 10 years of commercial and political success has left Beijing vulnerable to the very tai-chi tactics that it has used so successfully. This time, China is the big, over-confident powerhouse facing smaller, weaker opponents who are learning to yield and withdraw, only to reemerge somewhere else. Interesting times.

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This entry was posted on Monday, June 14th, 2010 at 10:17 am and is filed under Managing in China, Recovery Now, Chinas Fractured Web. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.