China’s Consumption Growth

I recently read a reporter’s coverage of Foxconn and thought the major financial press might want to consider also covering the much bigger picture, which is a movement that one sees only once in a lifetime…..and in this case that movement is a quiet and under the radar trend of Chinese companies moving their senior management and facilities over to the United States. What I mean by that is quite simple: the movement of their intellectual property, brainpower and boatloads of working capital……you heard right, everything but the average Chinese factory worker that was in higher demand over the past 40 years than a Stanford graduate. Could you EVER possibly even fathom such a thing happening? Now, I don’t want to get ahead of myself here by making such a bold projection, but yes a few have made the move and the rationale is the same reason we packed our bags and headed to China over 40 years ago – – to maximize corporate earnings, enhance shareholder value and meet the insatiable demands of the growing American middle class. (Rings a bell?- – “According to a study by consulting firm McKinsey & Company, 76 percent of China’s urban population will be considered middle class by 2022. That’s defined as urban households that earn US$9,000 – US$34,000 a year. … In 2000, just 4 percent of the urban population was considered middle class.”*

So what we are seeing is a select few companies heading to the United States due to increasing manufacturing costs in China, huge subsidies given by President Trump – let’s not forget $10 billion just to Foxconn for their move to Wisconsin – – access to some of the smartest minds in the world for development of the next generation technologies and, most importantly, the ability to be closer to the end client, thereby copying exactly our model of cutting out the middle man and boosting margins significantly.