European companies' outsourcing

[Benn]

Outsourcing their activity to cheap labour countries has become a tradition among European enterprises. Every day we can hear that another company cut several thousands of workplaces in their factories because they opened branches in China etc.
Will this ever stop? Maybe when China becomes rich, its companies will begin to outsource their activity to Europe, because of the cheap labour force in Europe? :geek:

[Faw_Peter]

This would be the dream of the Chinese government - Europeans working for China. Such a thing is not gonna happen in the closest 20-30 years. But, still, times are unpredictable

[sasha]

I think that in China there are subventions for many indurtrial branches. It is conducted until it devastate concurency. Then subventions are lower and lower and prices became more real. The cloth industry is one example. China has destroyed others and became leader at this industry only because dumping prices. Now we must be prepared for Chinas domination in this industry. It'll happen in other industries.

[Benn]

China has a well-defined policy in this sense. Everything they do is not in vain. We are led by their production for already two-three decades It does it patiently, I mean they don't need everything promptly, just like Americans need instantly the Iraqi oil.

[M.Helen]

European comanies will depend on China whether they want it or not. It can only be stopped if the number of Chinese reduced 10 times, but it's impossible

[Terry]

China, in comparisson with other countries, registers the fastest economic growth in the world. This is because European investments come from the right and from the left. But, if European companies cease outsourcing their factories to China, the development of the country might stop.

[Steven]

no, you're not right Terry. Even if European investors cease financing the Chinese business, China's development won't stop. There are already enough big, rich transnational enterprises in China which are ready to make solid investments in any sectors.

[Benn]

Soon Europeans will feel the consequece of outsourcing. The products which earlier had been producing here in Europe, are now going to be of a poor quality.

[Terry]

yes Benn, actually this is already felt. I mean so much counterfeited production on the market...
You can't be sure now whether it's an original brand or fake.

[Faw_Peter]

You can distinguish a Chinese product by its weight. Chinese focus on appearance, however the things inside are not qualitative and break easily.

[Terry]

Nokia is the brand which, over the past years, met serious problems with Chinese manufacturers. The problem is that some poor Chinese companies, in order to promote their product, name their brand the same as some certain brands. For example, we have such a product - Nokia N96, while the Chinese have a product named N96i. The appearance is the same as Nokia's one.

[Hakan G]

Guys I think you are missing something here. Europe will never switch places with china in the way you are saying. And this is because only countries with a developing economy are concentrated in the production sector. The most developed and stable economies are in countries were the share of services is up to 70% instead of production. Those facts are proved by history already and scientists.

Just remember the geography classes .

[Big_Becka]

I don't know - Britain started outsourcing manufacturing years ago, notably during Thatcher's government (when the mines and steelworks declined). It gave us temporary prosperity, but when the recession came in the 90s we had mass unemployment and poverty. The government did actually subsidise foreign companies to set up manufacturing plants in deprived areas of the UK, such as Cornwall and South Wales! Some Japanese electronics and car manufacturers still have sites here. I am sure it will happen again.

[Terry]

So, as I understand, during the Thatcher's times your (UK) companies began to outsource their production, but, in the beginning of the '90 it was vice-versa, it subsidized foreign companies to open their branches in UK?

[Big_Becka]

Yes, Terry, but it's not quite so simple. We effectively outsourced heavy industry by buying materials from abroad - coal, tin, steel, etc. (there were also accusations of government corruption at the time, so it is not a simple issue).

Other production declined naturally - despite a "Buy British" campaign, electrical goods (e.g. Amstrad, Thorn) could not compete with other countries, and the companies just closed down.

The companies that were attracted into the UK in the 90s were light industries, but were predominantly encouraged to set up in areas that had previously been mining / steelworking areas. Once a mine has been closed, it takes time and money to reopen it (they often flood, and shafts subside and become unstable...)Skilled workers were employed on low wages, working on a production line for long hours, and young people have little to look forward to in life unless they leave. People feel very bitter about the situation. So it is not quite a happy ending :-(

However, I have heard that some mines are being reopened! Because of increasing costs of buying from abroad, and concerns over politcal stability. This is why I think these things are cyclic 8-) It is also not just about money - many people bouycott certain clothing brands because they are concerned about child labour, or buy local food because they want to support British farming.

[Hakan G]

That's an interesting point of view, especially about the consumers buying products of local production. Thanks’ for sharing

[Benn]

The companies attracted into the UK, should have kept being engaged in light industry. Light industry was a key to success for those companies, since it doesn't need big expenses and the business is quite simple.

[Nicholas]

Who knows, maybe the taxes made the trick impossible.

[Terry]

You're saying the government imposed special high taxes for the light industry? I don't think so. Light industry doesn't affect the environment as against other industries.

[Hakan G]

Well there must be a reason

[Becka]

Companies were incentivised to set up in these areas by receiving grants and incentives (such as not having to pay council tax for a fixed period of time). Some factories are still in these areas, but some moved after a few years, once the incentives ran out. Some companies were still unable to compete with Asia, even with the incentives (e.g. Marks and Spencer moved the last of their UK clothing production to Asia in the late 90s)

Here's a little about what's available in South Wales, which is an ex-mining area typical of this discussion:
<!-- m --><a class="postlink" href="http://www.rdwhiteman.co.uk/Services/Government-Grants-and-Financial-Incentives/index.asp">http://www.rdwhiteman.co.uk/Services/Go ... /index.asp</a><!-- m -->

[Steven]

It seems that European textile production is bought only by the richest ones. China took over the entire market.

[Karl.in.eu]

I’ve totally forgot about China. Now I remember the “Not made in China” protests, and I get the point here ...

[Benn]

I find these grants pretty high. 50 - 300 thousand pounds is more than a mere incentive. Is it only South Wales that enjoys these facilities or the entire country is subject to that?

[Hakan G]

It seems that European textile production is bought only by the richest ones. China took over the entire market.

This is mostly specific for the Eastern Europe, but not for EU countries.