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The inflection point in reversed capital flow from China to the US has occurred and will accelerate- Gordon Housworth [ 1/15/2008 - 21:05 ] # On the Brownfield side of manufacturing, automotive manufacturers and similar Tier 0 producers; and on the Greenfield side, Venture Capitalists, have driven their respective tier base and investment stable firms to China based solely on piece part or operating cost with no particular thought to what happens when (a) the cost advantage dissolves, (2) the effects of that move - which I call destabilization once its full ramifications become felt (also here and here), and (3) the shifting of money from dollars and treasury notes to investment by Chinese entities at a time when their US/EU competitors are facing relatively higher capital costs. I wager that many firms don't even have the foresight to look past the piece part cost trap much less the other drivers. With so many sitting ducks, Chinese investors will prosper. Monaghan speaks of a Chinese inflection point that I submit has already arrived but its structural effects have yet to make a measurable effect:
None of the above includes the ultimate destabilizer when the Chinese employ administrative edicts, tariff strictures and noncommutative standards (Chinese products meet the standard but foreign products do not) to force out foreign firms out of China in concert with investments into the home territories of those firms. See Confluence of thinking on Chinese outsourcing and supply chain risks from DSB and USCC. In any case, Monaghan's inflection point of capital flow had already begun only to be accelerated by weaknesses occasioned by the excesses of the subprime loan fiasco. China and other sovereign state investors will acquire stakes in key US investment banks on the cheap. (Yes, the markets have continued to fall, making some of these investments look less attractive, but were it not for the subprime impact those stakes would not have been available at all, much less than at the negotiated prices.) Monaghan makes what I would call a statement of the patently obvious were it not for the many firms that are unaware:
It is essential for firms to break out Jack Welch's five strategy review questions:
These should be asked frequently and especially at any change in operating or environmental conditions. (They form a key jump point for our strategic planning and technology forecasting efforts.) Most firms are not doing so with respect to China, or if they are, do not like their implications and so push them aside. China's Inflection Point Citi Writes Down $18 Billion; Merrill Gets Infusion The Subprime - Trade Deficit Connection Sub-prime Casualties Who Should Have Known Better $9.4 Billion Write-Down at Morgan Stanley Case Study: Jack Welch’s Creative Revolutionary Transformation of General Electric and the Thermidorean Reaction (1981–2004) China Investing in Rust-Belt Companies Control Your Destiny or Someone Else Will The GE Way Fieldbook: Jack Welch's Battle Plan for Corporate Revolution Gordon Housworth InfoT Public Intellectual Property Theft Public Risk Containment and Pricing Public Strategic Risk Public |
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