1. The Cheating “China Price” and Weapons of Mass Production

The China Price. These are the three scariest words in U.S. industry. Cut your price at least 30%, or lose your customers. Nearly every manufacturer is vulnerable—from furniture to networking gear. The result: A massive shift in economic power is underway.

—Business Week

The China Price refers to the fact that Chinese manufacturers can dramatically undercut competitor prices over a mind-boggling range of goods. As a result of the China Price, China produces more than 70% of the world’s DVDs and toys; more than half of its bikes, cameras, shoes, and telephones; and more than a third of its air conditioners, color TVs, computer monitors, luggage, and microwave ovens. The country has also established dominant market positions in everything from autos, furniture, refrigerators, and washing machines to jeans and underwear (yes, boxers and briefs).

Given China’s demonstrated ability to conquer one export market after another, the obvious question is this: What economic factors really drive the China Price? This is an extremely important question because the answer goes to the very heart of The Coming China Wars debate. If China is winning in the international trading arena on the basis of a cheap, well-disciplined labor force and superior manufacturing methods, that’s one set of facts. It is quite another set of facts entirely if China is cheating, which it is. In fact, much of the China Price advantage is the result of slave-labor conditions coupled with a potent array of unfair trade practices that violate virtually every tenet and norm of international trade.