Sunday, March 16, 2008


I tend to look for ways to falsify a theory prior prior to taking any action, as the confirmation bias is such a problem.

However, the following story on China is another testament to the "paper dragon" thesis I have maintained on the blog for some time. Its only a matter of time now...and the big boy professionals are only bullish because they have to have someone to sell their financial assets to.

Putting all of one's eggs in a country that has never experienced true "capitalist pig" style chaotic outflows of funds combined with sharply decreasing financial asset prices has never seemed like good a long-term investment thesis to me.

Costly leap - pressure on the factory floor
Rising inflation and wage costs are transforming the Asian giant's
industries and its role as the world's low-cost factory.
John Garnaut reports from Shanghai.
March 15, 2008

The world's second largest sportswear company, adidas, is confronting a new
and unexpected problem. The costs of labour, materials and red tape are
spiralling upwards in its great production heartland in southern China.

It used to be that money made the rules and multinationals such as adidas
could always extract a better deal by threatening to move offshore. The
company runs more than 250 factories here, after all. And each clothing
factory employs 3000 people, on average, while every shoe factory has seven
times that number.

But the Chinese Government is no longer interested. It has recently
abolished export rebates, introduced tougher environmental and labour laws
and increased the minimum wage - squeezing production margins even tighter...

No comments: