The good news is that a lot of manufacturers are having second thoughts about setting up manufacturing plants in China. The reason is, well, the Chinese.

We in the West kid ourselves thate verybody is equal and that deep down, everybody has more or less the same ethics. That is a very dangerous propostion to pin on Chinese. To put it simply, Chinese business ethics do not exist.

Manufacturers who relish the thought of their product being produced in Chinese factories where low paid workers work two eight hour shifts, have come to the realisation that after their representatives go home, the Chinese get up to a little hanky panky. Unknown to their owners, these factories often work a third shift using sub standard materials. This was the reason why the batteries in NOKIA phones started blowing up all over the world.

The Chinese will counterfeit anything. What's more, they don't see anything wrong with doing it. Manufacturers who find out what is going on and who make legal representation to the Chinese government or legal system, may get sympathetic hearings. But that is all they will get. The Chinese government has no intention of killing the golden goose.

So be careful readers. When it comes to Seiko watches, Ray Ban sunglasses, Nissan car parts, Prada handbags, Billabong clothes, North Face sportswear (called "North Fakes" in China), or just about anything, nobody knows who is making what anymore or what the guarantee of authenticity or quality is.

One manufacterer of luxury goods was rung up from Peking by a friend on holiday, who complemeted his friend on their fabulous new store in Peking. His friend said "We don't have a store in Peking."

That's classic, redneck. What a time to choose to lecture us about the lack of ethics in Chinese business!

Tell me how ethical we appear to the Chinese, given that we have a bureaucracy - if not a government - that supports an Australian company delivering bribes to the leader of a country with whom we are eager to wage war. And I don't believe we have heard the last of this either - I strongly expect the dirt to spread widely, probably onto BHP, possibly to other representatives of our gallant raw material exporters.

The Chinese do business differently, it is true. They prefer to work with relatives and friends than with foreigners and strangers. There are bad apples in the barrel too, but we are not without a few of those ourselves, are we? Skase, Bond, Williams, Rivkin, Adler - just to name the ones who have been caught.

Your view of their shortcomings is rapidly becoming out of date. It is not in their longterm interests to allow unfettered copyright abuse, if only because with a little capital and effort, the same factory can be used to produce higher value goods that are not fakes.

Blinkers off. Talk to some people who are working there right now, and find out for yourself how much progress is being made. If you insist on hearsay as your main source of information, so be it. But be aware that you may not be as well informed as you might imagine.

Gregs capacity to look to the future seems to be able to take him as far as the end of his nose at best: We all know he is disheartened about the state of Australia but it shouldnt be effecting his judgement to the point he writes several hundred words on the bleeding obvious.

China has not sprung up like a mushroom over night; it has been looming as an economic freight train for decades. Greg's warning is some what of a waste of time - and in this instance a waste of space.

Pericles,
your diligence in exercising restraint on criticising my 'rants' is praiseworthy, as are your alternate trysts into actually criticising.. all is welcome.
Same to you Yabby.. appreciated (while not agreed)

Pericles said:

"It is neither, simply a fact of business life that goods are made more cheaply in China than in Adelaide."

Yes.. but 'why' ? Pericles your usual incisive analaysis is sadly lacking here. Lets dig 'behind' the why....

1/ Union pressure over the years to 'improve working conditions'
2/ Chinese dictatorial imposition of artificially LOW labor rates.
3/ Economies of Scale

Now 1 and 2 are both feeding the situation. In terms of Australian national interest, they are mutually incompatable and exclusive. 3 is just a matter of willpower,capital and global marketing.

How can they be addressed ?

a) Increased automation of labor intensive processes (using low cost CHINESE machines :)

b) Global marketing perspective.
c) Identifying specific target industries which lend themselves to our resource supply and focusing on the value adding.

It doesn't really matter which way we go, labor will lose out.
The only thing 'inevitable' is that labor rates in Australia are unsustainable for anything that we wish to compete on in the world.
So it is either 'automation' or cut labor rates and costly working conditions. Or, set up special economic zones where labor rates for Indonesian guest workers can be applied and transport costs reduced (shock horror :)

There has been a FLOOD of Chinese made Furniture and even sink tops and taps coming into Australia. Canterbury road Kilsyth is full of them. HUGE 'boss' desks in fine timber..for like $600 ! but we CAN make such, with automation and efficient business practices, with a GLOBAL marketing. We could even set up 'finishing' mini factories in target countries to reduce that cost.

Yabbs... I love my Bible :) it has a future 0_-

For a few thousand years, my dear Pericles, the cost of doing business in uncivilised countries in the Middle East was by greasing a few palms with baksheesh. If the AWB is greasing a few Iraqi’s palms like everybody else, then I am impressed. I didn’t think that Australians were sophisticated enough to deal realistically with Muslims. Whatever virtues the Islamic faith bestows upon it’s adherents, honesty has never been the most prominent.

But if China wishes to remain within the WTO, then it has to live with a few ground rules. Two very important ones are respect for copyright and a perception by your business partners that you can be trusted to keep agreements. On both of these points the Chinese are failing badly. It appears that the Chinese attitude to foreigners building factories in their country is.

1. Thank you for building a factory in our country to produce your goods.

2. Thank you for teaching us how to manufacture your goods.

3. We recognise how important your trademark is for marketing quality goods.

4. We will use your trademark whether you like it or not.

5. Now, go away. We do not need you anymore.

This is why western firms are having second thoughts about doing business with the Chinese. As for where I get my information, that is simple. I am a war buff and I was absolutely fascinated with the Chinese attitude to their war with Japan. To most Chinese, it was simply a means to make money. This appears to be the favourite pastime of all Chinese.

Other books that I recommend are “Lords of the Rim”, which gives a historical perspective of Chinese merchant “kongsi’s”. This book also displayed how Chinese Communism was a continuation of the traditional hostility which the ruling class in Peking had always had for middle class merchants.

The second book I read was “Knockoff, The Deadly Trade in Counterfeit Goods.” This book dealt with world counterfeiting, but most of it deals with the Chinese and their incredible lack of business ethics.

"The only thing 'inevitable' is that labor rates in Australia are unsustainable for anything that we wish to compete on in the world".

David its far more complex that that, but it comes down to comparative advantages. Switzerland for instance got wealthy, without resources, with extremely high wages, just by being smart.
Go to your local Coles store, Lindt chocolates are on the shelf, made is Switzerland. People buy them. Price is only one reason to buy something, there are many others. Australia has plenty of areas where we have comparative advantage, so we have to focus on those things and get rid of some of the things that hold us back.
Taxing exports for instance. An expensive and increasingly litigious society, which in the end is passed on in insurance premiums etc.

Pericles, I have to disagree with you on AWB. Most of the time, Aussie companies are like babes in the woods of the international jungle out there and are taken to the cleaners. AWB plays the game against heavily Govt subsidised Govt products from Europe and America and they play it pretty well.

The reality is that they have to perform and move wheat, unlike their competitors. Farmers are directly affected by their results.
Before the politicians mouth off, they should first of all compensate farmers for decisions that they took for political reasons and farmers got shafted and are still owed money from even before the Gulf war, by Iraq. Australia might have gone to war to keep George happy and Johnny in his good books, but trade is trade and Iraqi people need to eat, farmers here need to sell their wheat. I doubt if too many Aussie politicians really understand the real world of trade out there. Its dirty and nasty and its about survival of the fittest. The UN were free to scrutinise those deals. If they didn't do their job, oh well, thats there problem.