Now Hear This!

As the $700 billion bailout package moves through, China and the European Union (EU) linked arms today, bracing themselves for fallout from our economy.

With a looming US economic state that the government is now admitting may soon be an official recession -- and one that some analysts suggest could lead to a greater depression if the next administration doesn't pull America out of its slump -- the two world powers are putting aside their differences and are opening up trade somewhat. The trade chiefs for the EU and China have reach "points of consensus," according to Reuters, on things like IP rights.

They claim to be doing so to strengthen the global economy in the face of turmoil and the agreement comes despite the EU filing 12 anti-dumping cases aimed at Chinese imports last year, some of which included cases on technologies like energy-saving light bulbs. 

China's arm linking with the EU is wise; it need all the trade friends it can get right now, as its own economy isn't as great as it used to be. Exports are slowing (although still remain high comparatively), and inflation as well as a housing slump have begun, squeezing the Chinese.

To thwart that, the Chinese government has been readying laws that better respect workers and could see minimum wage upped. That's great for human rights, but no so great for the electronics companies that rely on China's cheap labor.

The cost of fuel across the globe is also on the rise, and moving components and goods from China to point B needs to be taken into consideration when looking to the future of manufacturing.

As it becomes more expensive to manufacture in China, end product prices will rise and they will do so during a time when US consumers may be forced to decide between increasingly expensive necessities like milk and gas or buying a new cell phone.

China, which had once promised to provide cheap labor and manufacturing for the electronic supply chain for decades out, may soon lose its low-cost appeal, weakening the argument for outsourcing jobs and manufacturing there.

It's doubtful, though, that those jobs will come back to the US. While we have the talent, few states welcome manufacturing in a way that benefits business (ie with significant tax breaks, land loans, low cost of living, etc). California's practices have driven many companies out and whilst New York has IBM encouraging a "silicon alley," even rural upstate NY is costly compared to, say, Vietnam. 

What do you think? Share your thoughts on the global economy's impact on tech, the future role China will play in our electronic supply chain, and the EU-China "consensus" below.

--Suzanne Deffree, Managing Editor, News