Chinese Incentive?

In a wonky article from the Bicycle Retailer and Industry News, we can see a little forecast for prices of bicycles coming out of Asia. The article focuses on China's future conundrum between labor-rates and a growing middle class. The article points out that Chinese wages are increasing, which is great for Chinese workers, but reduces the incentive to locate factories in China.

Chinese workers are gaining increasing opportunities to earn a living closer to home and often fail to return to their distant manufacturing jobs where they are housed in dormitory compounds with other migrant workers. The high turn-over may also lead to production quality issues and more resources spent on training.

What I found to be very interesting about this article was the attitude of Taiwanese companies to abandon China and remain in Taiwan. I have heard this sentiment echoed from people in other industries as well as the bicycle industry. The expense of operating in China does not offset the estimated savings. With provincial and local governments free to arbitrarily manipulate the system, many Taiwanese companies find they serve more as occupational training centers for Chinese workers who leave or start domestically owned factories. This seems to be the opposite of what the Taiwanese government and the American Chamber of Commerce have been touting for the past couple of years. Both have been bullish on increased Taiwanese investment in China.

I have been told first hand of Taiwanese companies that saw their quality plummet upon moving to China while their operating expenses increased, leading them to return to Taiwan where the labor and infrastructure was more reliable. Others were crowded out by local bureaucracy.

Taiwan now has a reputation for high quality bicycle parts and equipment and that reputation translates into value as most cyclists want to buy quality goods.

Here's a blurb:

"But the Chinese government is also fostering labor-rate uncertainty, said Ying-Ming Yang, chairman of the Taiwan Bicycle Exporters Association and president of tire-maker Kenda.

Chinese authorities, who make decisions on minimum wage rates, benefits and pensions with little warning, often surprise factory management.

Business hates uncertainty, Yang said. “I worry that the situation could get worse,” he added. For example, one province announced that minimum wages would go up 28 percent effective April 1. It later made the date retroactive to March 1.

Still, OE pricing has remained relatively steady and consumers have yet to feel any upward price pressure from Chinese goods. The question, Yang said, is how long can manufacturers absorb cost increases?

Kenda has moved some production back to Taiwan from its Chinese operation as the pay gap tightens between Taiwan and Chinese workers, Yang said. At its Chinese operations Kenda has bumped up salaries and now pays for food at workers’ dormitories."

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Also:

Sesquipedaustralian will be blogging on his trip around Taiwan :here

The Bicycle and National Identity

Here's is a great little video of one person's Top Ten Cyclists. Some of the footage is truly amazing and inspiring. You can really get a sense of the grit it takes to even compete at this level. Only after you've hammered for a day on a bike can you fully appreciate the heroics these guys have accomplished. Look for the Lance snub.

The Bicycle and National Identity

With the Tour de Taiwan scheduled to begin on March 14, I think it is really amazing how cycling has become a significant part of Taiwan's national identity. People love to turn out and watch.

As most people know, Giant is the world's leading producer of bicycle frames and related products, but it is not the only major player in Taiwan. Several large companies work in close cooperation with smaller subcontractors that produce much of the equipment that makes its way into the professional peloton. Despite what many folks are led to believe, Taiwanese companies do not simply supply the labor to produce foreign designs, but rather conduct much of the initial R&D. The now ubiquitous compact geometry was first developed by Giant to fit more people over fewer frame sizes. This close and cooperative relationship between the OEM, subcontractor and foreign customer has allowed the bicycle industry to seep from the centralized factory compound deep into the township economy. Initially this phenomenon went against the Leninist sensibilities of the KMT during its years of political monopoly. U.S. pressure helped break the state's stranglehold on large industries and allow for small companies to grow and expand.

Taiwan's particular historical trajectory resulted in Taiwan developing the unique economic and industrial relationships between the center and the periphery. Following WWII when most Taiwanese were excluded from participating at the center of political, cultural life and state driven economic enterprise, those who owned land and could rely on extended family for labor, could deploy these resources to establish small to medium sized enterprises. It was not uncommon for young men and women of the era to have received some industrial and vocational training under the Japanese. These small to medium sized enterprises often took advantage of guanxi networks to build the foundations of an industry. For example, at one time, almost the entire township of Caotun was in some way involved in the umbrella manufacturing industry. Homei did textiles and the township of Chingshui once produced hats for the Japanese where the skilled weavers later went on to sew tennis racquets and other sporting goods... including footwear and later parts for bicycles. Piece work was a common way to enter an industry and involve the entire family in the process. From this period the Taiwanese bicycle industry really took root.

The Taiwanese consciousness of their global role as the producers of the world's finest bicycles was partially driven by politics as many political actors sought to strengthen a Taiwan centered identity which has existed for at least 100 years, but an identity which has been assailed by competing ideologies since its inception. Despite the politicization of the bicycle in Taiwan, the image has been widely accepted as a meme of both the Taiwanese identity and Taiwanese pride. It is not uncommon to see politicians ride bicycles or pictured along side bicycles to appeal to the Taiwanese national identity which is shared by approximately 80% of the population (Often those who do not support the Taiwanese identity by deed are the first to appeal to it).

This conflation of the bicycle into the Taiwanese identity often manifests itself on the road where ordinary folks take an interest in a group of passing cyclists. I get spontaneous waves and smiles from random strangers when I am on the road. Children root and cheer. I have had complete strangers hand me food and drinks. In the U.S. the only time you get a drink is when someone shouts "faggot!" and throws a Big Gulp at you from the window of a pick-up. In Taiwan, people like to admire a nice bike and they can usually tell if it is good or not.

Still, I always get the same question... "Is it a Giant?"