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Stop blaming China - partners win, whiners lose

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Stop whining about China. Stop looking for scapegoats. Maybe the problem isn't with them, but us.

It's time to get some perspective. I just received a flier from Target Corp (NYSE: TGT) advertising a Euro futon / contemporary sofa for $99, a Haier under-counter stainless steal refrigerator for $99 and a microwave for $30. These prices are so low I had to check three times to make sure I was reading them correctly. No gimmicks were found.

Consider this, it would be a waste of our resources to have Warren Buffett or Steve Jobs mowing lawns. That is not the highest and best use of capital should we choose to pay the millions it would cost to hire them. Conversely, it would be an extreme waste of their talent if they worked for your average gardeners' wages. Our highest and best use of resources is to pay foreigners to do the work.

Historically we've paid foreigners (immigrants, both legal and illegal) low wages on our soil. Now we are paying them low wages to do the work on their own soil. What's the difference? We do not have the manpower to do the work anyway.

If we designed and manufactured the same merchandise in the United States it would cost 300% to 400% more. That would be fine if workers here received that much more in compensation, but that is not the case. Most people would simply have to do without, unless of course your average annual salary was increased from $45,000 to $180,000, yeah that will happen -- not!

We have an imbalance of trade because we are being out-produced -- and we spend beyond our means. This is true on a macro-scale by the federal government and on a micro scale when someone spends thousands of dollars (going into debt) on a wide screen TV when they can buy a traditional TV for 90% less.

On a separate note, the Chinese are experiencing quality control problems that have been highlighted by lead paint on children's toys and toxins in pet food. Some of our companies have been flocking to China because of lower safety and environmental standards. These standards have to be raised, and this is happening. No one should get a free pass on this and if you follow the stories you will find that no one is more embarrassed and harmed by these events than the Chinese. In terms of penalties for such violations, the Chinese exceed us in this regard also, and some have paid with their lives. This includes corrupt government officials as well. I have not heard anything about Presidential pardons for convicted felons in China. As far as I know there is no penitentiary 'light' for their convicted company directors -- it's hard time. They take these matters very seriously.

Now, some might complain about currency manipulation, government subsidies, and other attempts to manage their economy, and to the degree that there is not a level playing field there are issues to discuss. However, we have been pleading with the Federal Reserve Board to respond to the liquidity crises now affecting the market by adjusting interest rates (and the value of our currency), and we have farm subsidies, energy subsidies, tariffs and taxes that can be called many different things depending on your point of view but they all fall under the category of government manipulation.

China is having growing pains. They are having problems dealing with new social, political and economic realities and mistakes are being made -- just like everywhere else. In the long run the advantages of working with them outweigh whatever unfortunate incidents occur from time to time. China has gotten most of the headlines lately, but the same is true for India, and Russia, and anywhere else you care to be overly concerned about. So let's continue to be vigilant, improve our communications, extend the dialog and move on.

To verify my track record, including bad calls, read Chasing Value and Serious Money. Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

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Last updated: July 05, 2009: 04:57 PM

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