The End of Cheap China: Economic and Cultural Trends that Will Disrupt the World [Hardcover]

Shaun Rein (Author)

Book Description

Publication Date: March 27, 2012

An exposé on how the rise of China will affect the American way of life

The End of Cheap China is a fun, riveting, must-read book not only for people doing business in China but for anyone interested in understanding the forces that are changing the world.

Many Americans know China for manufacturing cheap products, thanks largely to the country's vast supply of low-cost workers. But China is changing, and the glut of cheap labor that has made everyday low prices possible is drying up as Chinese seek not to make iPhones, but to buy them. Shaun Rein, Founder of the China Market Research Group, puts China's continuing transformation from producer to large-scale consumer - a process that is farther along than most economists think - under the microscope, examining eight megatrends that are catalyzing change in China and posing threats to Americans' consumption-driven way of life. 

Rein takes an engaging and informative approach to examining the extraordinary changes taking place across all levels of Chinese society, talking to everyone from Chinese billionaires and senior government officials to poor migrant workers and even prostitutes and drawing on personal stories and experiences from living in China since the 1990s as well as hard economic data.  Each chapter focuses on a different aspect of China's transformation, from fast-improving Chinese companies to confident, optimistic Chinese women to the role of China's government, and at the end breaks down key lessons for readers to take away.

The End of Cheap China shows:

• How rising labor and real estate costs are forcing manufacturers of cheap Chinese products to close, relocate, or move up the value stream
• How a restructuring economy moving away from exports to domestic consumption, and rising incomes will create opportunities for foreign brands to sell products in China rather than just producing there
• How Chinese consumption will build pressure on the global commodities markets, causing inflation and friction with other nations
• How China's economic transformation spells the end of cheap consumption for Americans

China's days as a low cost production center are numbered. The End of Cheap China exposes the end of America's consumerist way of life and gives clear advice on how companies can succeed in the new world order.

Editorial Reviews

Amazon.com Review

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Q & A with Shaun Rein, author of The End of Cheap China

Shaun Rein

What is your background with the Chinese economy?
I first came to China in the 1990s and studied it as a graduate student at Harvard. At that time, the word "cheap" summed up China. Land prices and salaries were low and the quality of China's production was inferior. It was still difficult to find a decent job. When walking outside the gates of factories, you used to run into swelling crowds of unemployed workers with cardboard signs touting their skill sets in the hopes of finding a job. That has all changed in the last decade due to the job creation spurred by multinationals investing billions of dollars. Now the biggest obstacle to growth in China for most firms is finding talent even with China's large population.

What are some of the biggest economic or cultural disruptions happening now in China that people and businesses should pay attention to?
Too many businesses underestimate how fast costs are rising in China and how rising costs won't change anytime soon. In 2011, 21 of China's 31 provinces increased the minimum wage an average of 22%. The government has set a plan to raise the minimum wage by 13% annually for the next five years to spur domestic consumption and wean away the country's reliance on exports. Many companies might be forced to relocate manufacturing to lower cost countries like Indonesia. However, the reality is China's work force and infrastructure is far superior, so China won't lose its dominance in manufacturing. The resulting higher input prices will force companies to accept squeezed margins or they will have to transfer higher costs to end consumers. Instead of being a deflationary force in the global economy, China will export inflation to the rest of the world. Already import prices from China in 2011 in America were up 3.6%, the highest on record. Consumers around the world better get used to seeing higher priced products in stores.

What kind of global impact will "the end of cheap China" have?
Aside from higher costs, "the end of cheap China" means that China as a nation will become more powerful in global affairs which could cause more friction. Chinese companies will not only be investing more in countries like Canada to secure access to natural resources but Chinese brands will start selling products abroad and acquiring Western brands, as Chinese auto manufacturer Geeley with its acquisition of the Volvo brand. It also means China's government will take a larger role in global institutions like the United Nations and G20 in order to safeguard its interests. The key to China's rise as a superpower is to ensure that it is integrated enough into world affairs to reduce possible tension and to stop the fear-mongering and hysteria about China's rise.

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Review

"Brilliantly written" --Financial Times

"A Publishers Weekly Top 10 Business Book of 2012"

"Rein masterfully captures where [consumers] have been and where they dream of going" --Fortune

"Rein combines elegant writing and methodical research. Years of working in China have given him access to important players. Incisive interviews with billionaires, business executives, government officials, and migrant workers guide the pulse of the narrative.... essential reading." --USA Today

“Engaging. Full of vivid anecdotes from Chinese billionaires to senior party officials and even prostitutes. For any foreigners thinking about doing business in the Middle Kingdom, 'The End of Cheap China' is a good place to start" --Reuters

"Must Read" --Consulting Magazine

"A Lively Read" --Straits Times

"An Inside Look" --Industry Week

"Compelling, Engaging, Informative" --The Cayman Islands Journal

"Lively, Well-Written Book" --South China Morning Post

"Engaging, highly readable style with real-life examples from vast catalog of China research. For good measure, Rein wedded into China's elite, marrying the granddaughter of 1980s Politburo chairman Marshal Ye Jianying" --Asia Times

See all Editorial Reviews

Product Details

• Hardcover: 240 pages
• Publisher: Wiley; 1 edition (March 27, 2012)
• Language: English
• ISBN-10: 111817206X
• ISBN-13: 978-1118172063
• Product Dimensions: 6.3 x 0.9 x 9.3 inches
• Shipping Weight: 12.8 ounces (View shipping rates and policies)
• Average Customer Review: 4.4 out of 5 stars  See all reviews (67 customer reviews)
• Amazon Best Sellers Rank: #65,538 in Books (See Top 100 in Books)
  • #90 in Books > Business & Investing > International > Economics

More About the Author

Shaun Rein is the Founder and Managing Director of the China Market Research Group (CMR), the world's leading strategic market intelligence firm focused on China. He works with Fortune 500 and leading Chinese companies, private equity firms, SMEs, and hedge funds. Clients include Apple, Yum! Brands, Richemont, DuPont, Ecco Shoes, LG Electronics, Samsung, Unitas Capital, CLSA, China Capital Today, Hutchison Whampoa, Lane Crawford, Hard Rock International.

Rein is a columnist for Bloomberg BusinessWeek on business in China and teaches executive education classes for the London Business School. He previously was a columnist for CNBC and Forbes. He is often featured in the Wall Street Journal, Fortune, and The Financial Times and frequently appears on CNBC, Bloomberg, BBC, and CNN.

He earned his Master's degree from Harvard University focused on China's economy and received a BA Honours from McGill University. He sits on the Asia Council for St. Paul's School.

Most Helpful Customer Reviews

45 of 55 people found the following review helpful

3.0 out of 5 stars Some parts a bit alarmist, strain credibility March 19, 2012

By T. Redhed

Format:Hardcover

As an American businessman living in China for the last three years, not as an expat hanging out with other expats, not as a McKinsey consultant staying in five star hotels, but as a local, I have a hard time buying Mr. Rein's argument about the power of Chinese brands. The reality is, mainland Chinese don't trust Chinese products, for the most part. There are deep cultural and historical reasons for this.

Take Mr. Rein's example of Li Ning. Maybe poor Chinese buy their shoes because they can't afford Nike or Adidas or Puma. The brand itself is not considered "cool". Doesn't matter that the style is ok or that the price point is a little under Nike; it doesn't give face. Go into sports stores here and watch people flock to the foreign brands; Li Ning shelves look like a neglected younger brother. I almost feel sorry for them.

This book takes a semi-alarmist position that doesn't match my experience on the ground. True, some Chinese brands are respected, like Midea, Taobao, Alipay, CTRIP. However, for the author to suggest that China is or is soon to be producing the creative talent needed to really kick butt really strains credibility. One need look no further than their political and education systems to realize that China is about control, and duplicating what is already created. Look closely at their long history, you'll see that it's been that way for a very very very long time, and will continue for a very very very long time. They may buy up foreign companies to get the talent they need, but it's still mostly going to be their usual game of control rather then create.

For a more realistic view, readers can try "Poorly Made In China".

26 of 32 people found the following review helpful

4.0 out of 5 stars Uneven but Generally Very Good March 9, 2012

By AlexT

Format:Kindle Edition|Amazon Verified Purchase

Rein's book isn't an awful lot new to people who have lived or worked in China for a while but if you want to read, say, 3 books on China to "get" China today then this would certainly be one of them. It is hard to find a better reference for understanding the psychology and trends in Chinese consumers, workers, and the like. I've never seen much good research on intergenerational changes in preferences for consumption, savings and the like - I just know it from having been there so its nice someone has drawn on a lot of surveys to lay down the salient points. Similarly, the day to day of Chinese corruption and its causes and the local/national governance dynamic isn't something you read about in bloomberg or elsewhere but is covered here. Most people in China don't want democracy per se - they just want some accountability so that land expropriations stop and food is safe as Rein points out. You don't read that in the NYT but it is the truth.

Where Shaun lets the book down is where he draws very heavily on anecdotes to make broad leaps of logic without having done the work. One example would be in his discussion of China's exchange rate. Leaving aside the obvious point here - you don't wake up with a few trillion in treasuries after a big night out, its not an accident - the argument that appreciation of the yuan doesn't matter flies in the face of recent data in China (the trade balance post 05) plus, oh, I dunno, just about every bit of empirical and theoretical work in economics. Its a breezy comment without much backing unlike the rigorous work on consumption and its profoundly out of place. Sure some industrial clusters are so entrenched they aren't going to move - but in aggregate FX always, always matters.

All in all a great read where Rein sticks to what he knows, which happily as far as Chinese social and consumer trends is most of what there is to know.

13 of 15 people found the following review helpful

5.0 out of 5 stars An Insightful Look Into China From The Inside May 5, 2012

By Wilfrid K. F. Wong

Format:Hardcover

Before End of Cheap China is released to the Asia market, it is already banned in China. Why would a subject on economic and cultural trends that may disrupt the world received such treatment? I am intrigued. The author Rein is a mixed heritage of Chinese and Jewish. He married the granddaughter of 50 most important Chinese Communist party members in history. Because of his business background, he gets to converse with China's leading entrepreneurs on a regular basis. The author practically lives and breathes in China. End of Cheap China is largely a collection of Rein's social, economical, and political opinions of China written in a journal style. Because this is a still business book, at the end of each chapter, there is a short appendix catered for the business readers.

End of Cheap China is a good read, for those who wish to learn more about China from the inside. The journal writing style makes it easy to follow. His observation covers the areas of change in social, economic, political, and foreign affairs in China's past decade and a half. Observation that you may find intrigued due to the fact that International media does not always present the true picture from within China. Here are a few highlights of the book.

- The empowerment of women in China, on the trend of why women are now the social and economic driving force.
- Local officials versus central government, on why it is important to tell the difference as we read the news in China.
- Foreign factories set up in China now undergo pressure on resource turnover, escalated cost, and why they should target the local market.
- An understand of modern China history, Cultural Revolution (66-76).
- Local food-supply problem.
- China real estate market and GDP spending, an alternative view.
- China's foreign policy in 'soft power', example on Africa and Pakistan.
- The difference between Chinese management style and US / Japan management style when a company is taken over.

Because the content of this book is filled with the author's criticisms and opinions, it could get a bit disoriented. This book at times appears to be written for the Western businessmen who are investing in China. In other chapters, the author seems to address to the US government, to the Chinese government, to other governments, or to the Chinese people in China, on what they should or should not do. Each target audience - I would presume - has different agenda and potentially conflicting interests. It is unclear if Rein's goal is to advocate a win-win situation. Personally I would prefer a straightforward journalistic approach such as Nothing to Envy (a book on North Korea). Having said that, End of Cheap China is also a business book and it is packed with action items for those who are doing business in China.

I do not know how a book get banned in China. I admire the author's boldness in analyzing China at the ground level, talking to commoners in China as well as to the Chinese billionaires. To be fair, some of his criticisms go beyond China and are directed towards America. Maybe it is the book title. Or the prologue when he was approached by a young prostitute in 1998. Maybe it is his account of Cultural Revolution. In any case, I would recommend this book for those who wish to see China from a different perspective.