My Weblog

September 28, 2007

Flattener #6: “Offshoring”

Filed under: Uncategorized — yoddha @ 9:27 pm

Here, Friedman shares with us the details how in a few decades the status of China changed from ‘sold in China’ to ‘made in China’ and how in the next decade, it can change to ‘designed in China’. This shifting of jobs from manufacturing sector to services sector happens in any country that goes from developing status to developed status.

The year 2001, when China joined the World Trade Organization, proved to be a major booster for its economy. This and the emergence of Internet changed the outlook of China to that of a capitalist and emerging economy helping it attract offshoring business. China also benefits from the fact that it is so close to Japan.

How is offshoring different from outsourcing? Outsourcing means moving specific but limited function to another company and then integrating this back in the main company. Offshoring, in contrast, is when the whole factory is moved to another place.

Friedman also lets us know how the general impression that offshoring is lose-lose proposition for America is wrong. To get the complete picture, one need to take into account the profits that help American companies invest more in job opportunities in America and add more money to America’s economy.

In the end, Friedman cautions the investors of a political turmoil in the far future against the communist government in China. Also, a strategy ‘China plus one’ (invest in China and one Asian country) is said to be more advantageous for investors.

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