Ships, and the Chinese goods that sail on them…

I bicycled along the harbour shore in Titanic Quarter today in an unseasonably cold breeze. As always, my eyes were drawn to the ships at dock on the other side of the harbour. These ugly brutes, these unsung workhorses of the maritime world, are the capillaries through which a huge proportion of international trade flows. Almost every manufactured good sold in Ireland comes off one of these ships into one port or another. I spotted the flag of the Marhsall Islands, by all accounts more a tropical hell than a paradise in the middle of nowhere in the Pacific, a bleak chain of atolls famous mainly for being a nuclear test site and beset by poverty and squalor, and wondered at it flying in the Port of Belfast. The Yasa Aysen is owned by a Turkish shipping company.

 

Shipping is the oldest truly transnational business. It was the St. Gabriel of globalisation, having operated at a truly global scale for at least four generations, powered at first by the telegraph cable, later replaced by shortwave radio, now replaced by communications satellites, and like everything else profoundly impacted by the internet.

 

We never see them in Belfast, but there are some enormous ships coming in and out of China these days; on the route to South America they run manufactured goods one way and soya the other. On the routes to Rotterdam and Long Beach they mostly run empty back to China. There is some demand but shipping costs are low because of the amount of empty space. The West mainly exports invisible goods to Asia. This looks to me like a dangerously one club strategy. There are exceptions – Germany remains a power exporter, the Netherlands and the Nordic countries also punch way above their weight. Even the US exports quite a bit of high-end manufacturing equipment to China. But neither the UK nor Ireland makes very much that people in Asia actually need. To me, this is a problem.

 

Anyone with any doubts where the workshop of the world is in the early 21st Century should look at this chart on Wikipedia of the world’s busiest container ports. 6 out of the 8 busiest container ports and the world are Chinese. Chinese dominance is broken only by Singapore at number 2 and Pusan in South Korea at number 5. 9th place goes to Dubai, a massive hub for middle-men selling Chinese goods to Africa, India and Europe.

 

Where do Europe and North America figure? Rotterdam comes in 10th –  Rotterdam does a lot of things but a big part of what it does is take Chinese goods off big container ships, and send them up the Rhine by barge. The biggest American container port is Los Angeles at number 17, again a massive recipient of Chinese manufacturing exports.

 

But the big story from these figures is how much Chinese trade is not dependent on Europe and North America, a fact forgotten by too many in the West. So great is the Far East’s dominance in this list, that it is obvious that most of China’s trade in goods, by volume if not by value, is with other Asian countries. And nearly all of Africa is awash with Chinese goods, as anyone who has been there recently can attest to.

 

What is perhaps more surprising is just how much of a minnow India is. Its only container port in the top 50 is Mumbai, way down at number 26. India is growing in manufacturing strength, but its manufacturers remain vastly more focused on the domestic market than China’s. India’s great export strength is its capacity to export the skills of its English-speaking middle-class via the internet. The Indian white-collar workforce is growing fast, and while in the main their standard of living is not high by Western standards, it remains more than adequate enough to buy Indonesian-made televisions and Chinese-made tea sets. Expect Mumbai to keep moving up that list fast in the years to come.

 

The increased importance of imports from other parts of Asia for Indians’ standard of living has already had one positive real world outcome. The piracy problem in the Straits of Malacca, through which passes 40% of the world’s trade and 40% of the world’s oil, has been stamped out. India’s navy joined those of Indonesia, Malaysia and Singapore, all countries whose militaries have long and deep histories of distrust, in a multinational anti-piracy effort that worked. The settlement of the Achenese conflict doubtless also helped.

 

With shipping through the Straits secure, traffic management might become the next nightmare to confront the world’s busiest shipping lane. Remember, 60% of the world’s population lives in Asia, indeed the majority of the world’s population lives between the longitudes of Karachi and Tokyo, that is between 67 and 140 degrees East. As Asia’s middle-classes continue to grow, perhaps the long floundering proposals for a canal across the Isthmus of Kra might finally gain traction?

 

One point worth noting is the explosive growth in regional Chinese ports in recent years. China has been exploding economically. Could it overheat? Has it overheated? No country in history has gone forever without a serious economic crash and China’s run of fortune will at some point come to an end, at least temporarily. One of the remarkable things about China in comparison, let’s say, with the 19th Century USA, is the stability of its economic growth. Contemporary China’s contrast with the booms and busts of the years of the deadwood American Presidents could not be starker. But what will eventually make it go off the rails? One looks at numbers like these and comes to the conclusion that its just going to keep cooking until a bubble pops. What happens then? If I were the foreign affairs guru in the Head of Government’s office of any country in the world, that’s what I would be trying to work out.

  • Mick Fealty

    A veritable “total perspective vortex”…

  • Mister Joe

    Just for info, China is not the USA’s largest trading partner; it’s second. Exceeded by the trade with Canada by 20%.

  • @Joe – I’m Canadian Please – http://youtu.be/mWQf13B8epw

    @Mick – we need to start understanding how global forces affect us locally, in a region that will always be buffeted by much larger external forces, and in a city that will remain, just on population alone, a third-tier city for the foreseeable future. We all have views on globalisation but few of us think through just what some of the remote but powerful forces acting upon us are and what constraints they place upon us as a non-powerful actor.

    I find cycling a great way of getting the thought processes going.

  • And I love nothing more than a nice dataset to get my teeth into.

  • Pete Baker

    “One of the remarkable things about China in comparison, let’s say, with the 19th Century USA, is the stability of its economic growth.”

    And this is based on what, exactly? You’ve referenced explosive growth twice before making this statement. Not to mention questioning whether the Chinese economy has already over-heated. But I don’t see any attempt to map that economic growth, or measure it in any meaningful way, over any time period at all.

    And the post could do with some greater historical perspective.

    The East India Company and Viking trading networks to name just two earlier examples of ‘globalised’ shipping trade.

  • Mack

    “But neither the UK nor Ireland makes very much that people in Asia actually need.”

    I’m not sure I agree with that – consider ARM technology (Advanced Risk Machines from Cambridge in the UK) – their IP powers the CPU’s of the vast majority of smart phones and tablets on the planet.

    This is pretty good explaination of why no one else can compete with the Chinese in component assembly, attempting to do so is economic suicide (the Germans are exporting the machines that help assembly the components).

    http://thebeerbarrel.net/threads/the-beer-game-industrial-dynamics-and-why-iphones-are-made-in-china.12715/

    Quick summary – China’s scale in low end manufacturing means the entire supply chain can exist locally, dampening the Bullwhip affect experienced by each Chinese manufacture while arguably increasing it for foreign manufacturers that would attempt to compete.
    http://en.wikipedia.org/wiki/Bullwhip_effect

    May also be why the Americans are investing so heavily in 3D printers at the moment

  • Mack

    Typo in the above should be Advanced Risc Machines (Reduced instruction set computing), the descendants of Acorn Micro’s Archimedes computer..

  • 3D printers have been the next big thing for a while now, and I can see why. How close are they do being practical?

    PS – is that the view from Blouwbergstrand on your avatar?

  • No, it just looked like Blouwbergstrand. Except being on the wrong side of the pic. Time for bed I think…

  • Mack

    It’s been a while since I set it up, think it is Cape Tribulation in Daintree, Australia.

    Not sure when 3D printers will be practical, they seem to be coming down in price & generating more interest.

    It took decades (esp. the last 15 years or so) of hype around utility / grid / cloud computing before it became practical enough help fuel the current IT boom. It’s just a pity IT is powerful enough to pull the rest of the economy out of it’s rut.

    If history is any guide, could be a while, but they’re working on it..

  • Mack

    Sorry – posted a wrong link above (it was a forum linking to what I wanted to post). This is the one :-

    http://blog.marksweep.com/post/20469283331/the-beer-game-or-why-apple-cant-build-ipads-in-the

  • Mister Joe

    There was a report earlier this week that 3d printers can now or will be soon able to be used to make your own prescription drugs. Doubt if that will exclude recreational drugs since a lot of those are misused prescription drugs. So………

  • Mister Joe
  • dwatch

    Here is the reason why China is the biggest exporter of world goods. Millions and millions of Chinese factory workers work for $1.36 US dollar an hour.

    “Average Cost Of A Factory Worker In The U.S., China And Germany”

    http://www.google.co.uk/url?q=http://www.huffingtonpost.com/2012/03/08/average-cost-factory-worker_n_1327413.html&sa=U&ei=wt3KT4qJE8fx8QPSlIHjBg&ved=0CBUQFjAA&usg=AFQjCNFdoDEDu8zHM4aqcCbrnu-7_ZKkrg

  • Rory Carr

    “And nearly all of Africa is awash with Chinese goods, as anyone who has been there recently can attest to.”

    Have you met anyone then, Gerry who has recently been to all of Africa? Spread himself a bit thin I’d imagine.

  • veryoldgit

    China might one day introduce democracy, human rights, trade unions etc. Lets see if the can still compete!

  • Mister Joe

    There will likely be a revolution in China in the coming generation. Wonder what that will do.

  • Not so sure about a revolution in China, the state has successfully legitimised authoritarian rule following Tiananman Square, and there is no evidence of a legitimation crisis. There is a burgeoning young middle class after all. The Chinese authorities whilst liberalising some economic controls have kept a tight grip on the political machinery thus not repeating Gorbachov’s strategic error, indeed it could be said that they are echoing Lenin and his New Economic Programme – introducing some elements of capitalism yet keeping rigid control of the party.

    The above courtesy of someone close to me and their A level revision.

  • Comrade Stalin

    Mack:

    I’m not sure I agree with that – consider ARM technology (Advanced Risk Machines from Cambridge in the UK) – their IP powers the CPU’s of the vast majority of smart phones and tablets on the planet.

    Advanced RISC Machine or Acorn RISC Machine depending on who you talk to. It was initially the name of the architecture but the ARM company was later spun off from Acorn and became an entity in its own right.

    Not to be a pedant but the word “RISC” is very important; in the 80s it was a fundamental change to the way computer processors were designed and Acorn, later ARM, were one of the pioneers.

    As you may know, ARM’s product is essentially software; it’s a description that can be used by a semiconductor foundry to build a processor. ARM do not ship tangible products.

    The reason why ARM processors are found in phones and tablets is because, quite by accident, it turned out that their particular design was/is exceptionally frugal with power. Intel have improved their power consumption over the past five or six years and their performance per watt is significantly higher, but their CPU design is probably too complex to make it usable in portable devices.

    This is pretty good explaination of why no one else can compete with the Chinese in component assembly, attempting to do so is economic suicide (the Germans are exporting the machines that help assembly the components).

    Worth adding that a lot of the most advanced semiconductor assembly is not done in China. Intel’s plant in Leixslip, Kildare is (believe it or not) one of the most advanced semiconductor foundries in the world, the Intel CPUs in most computers are the most complex processors that exist, and those foundries are the places where the advances in semiconductor lithography are being pushed.

    Until a few years ago a large proportion of the world’s DRAM supply was made by Infineon in Germany. They proved unable to survive the commoditization of the industry.

    Regarding 3D printers – there is a lot of hype but they may well be the “next big thing” if someone can identify a killer application, and there is a good chance that this will happen. The part that is revolutionary is the idea that a physical object can be reduced to a data file that can be modified/refined on the fly and produced on demand. I doubt they will offer a way to replace manufacturing of things in bulk. However they may make it practical to do short-run manufacturing of bespoke parts or components. There may be medical applications eg building replacement blood vessels/valves or joints.

    On the subject of China .. the reason why so much manufacturing is done there is simply a question of cost. People are cheaper than machines there, a factor which is even more important than it may seem as retooling a production line for a new type of product is especially expensive if it is compared to retraining low-cost labourers.

    This is going to drive profound social change in China (it arguably is already) and will almost certainly led to the end of the current authoritarian regime in the long term as people start demanding their cut of the massive profits being generated by Chinese corporations through questions such as health benefits, pensions, working conditions etc.

    Cynics will point out that a lot of Apple products are essentially rebranded FoxConn devices. I don’t think it will be too long before the Chinese figure out how to design and market things themselves.

  • Mack

    CS – Yep corrected the typo in subsequent comment. They started out as an Acorn and Apple spin off iirc. Apple being forced to sell when they floated with bankruptcy. Wasn’t aware they sold software, thought it was licences to manufacture chips they designed.

  • Clanky

    It’s not only China.

    Some years ago, I worked on a small container ship (300TEU) sailing between Gdynia in Poland and Hull, even then we sailed west fully loaded and east with empty boxes.

    It woul seem like people are not the only thing that Poland exports.

  • Comrade Stalin

    Mack,

    When I say “software” I am referring to the file that ARM give you that lets you build the chip. Along with the license you get a Verilog file for the CPU.

  • Mack

    CS – You learn something new everyday 🙂