Is 100K Factory Revolution Worth Betting on?
This is really a question that is difficult to answer because the revolution may not be very big, and we are not yet able to estimate its effect. What is 100k factory shut down worth to you? That is really a million dollar question, which is why I will give you the advice that I found from an article online. According to this article, factories of advanced technology are being built in China and many foreign corporations are planning to build their factory there. The Chinese government is also supporting such move by allowing for foreign companies to build their factory in China.
This means that the competition for labor is getting so intense. The foreign corporations may be able to hire thousands of workers, but they cannot expect those same workers to work for them forever because factories of advanced technology will develop very quickly. The robots and other inventions of modern-day factories can replace all the workers of factories located in the past. Therefore, wages of people in the future would indeed be higher. Is that what you’re after? Please consider all this.
If such high wages can be obtained, how much will we pay for the Chinese revolution? Well, that depends of course on the price of the product. How high would the price be if the factories of advanced machines were built in the United States or Europe? It’s hard to say exactly, but you know it would be very high, right?
There are several factors that contribute to the price of advanced machinery. Of course, money is always a factor and we should never forget that. If we were to pay ten times the price of the same product in the Chinese factories, then do you think that the workers in the United States or Europe would accept that? If we were to give away our money for such a transfer, would the Chinese workers to be happy with that? It is my assumption that they would not.
I suppose there are some Chinese people who would take the offer, but this is a minority. What about the American and European companies that would be buying these products? They have no reason to give away their cash for something that is not even guaranteed. Are you starting to see my point here? You cannot give away something for free if you are not sure whether it will work out. This is why I say that paying $1 billion to buy Chinese goods is completely irrational.
In fact, I believe that the United States and the European Union should not give away their money for such transfer. The Chinese government will use the transfer to invest in more advanced machines and increase their capacity. Then they will have more factories and employ more Chinese people. This is just my assumption, but I believe it is correct. Please consider it.
If the Chinese government did that, it would obviously be beneficial to them. However, what would happen with all of the American and European companies that buy their products from the Chinese factories? It seems that it would cause a serious crisis within the American and European economies. Of course, higher prices for goods means lower profits for their customers.
Of course, higher prices mean that the customer gets a higher value for his money. Thus, the customer is willing to pay more for the product. Is this the direction that the Chinese government wants their economy to go? I am sure you do not believe that.
China is not in a crisis because it is not stealing the foreign currency; instead, they are using it to increase the value of their own currency. They realize that if they kept the currency artificially low, then they could continue to invest and grow at a higher rate. Of course, the central bank has to keep the value of the currency up so that the economy grows. Otherwise, they will become weaker and eventually be forced to devalue their currency.
So is the United States and the European Union interested in seeing a “100k factory revolution” in China? Well, they may see it as a way to increase their own value and become stronger. China would like to have a stronger economy so that it can become a strong world power. At the same time, they are not going to want to risk their own currency. Thus, the central bank will continue to control the value of the currency. It is very difficult to see a “100k factory revolution” happening anytime soon.
This is not intended as a prediction of what will happen, but merely to show you how the value of the currency changes over time. The interest rates are just a guide for you to understand this concept. When the value of the currency goes up, the interest rate usually goes down with it. On the opposite end, when the value goes down, the interest rate also goes down. You can easily use a free calculator for these conversions.
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