As anyone who follows the subject of outsourcing or “low cost region sourcing” knows, two significant events occurred last week. China reported a second quarter economic expansion of 9.5% of GDP and China revalued the Yuan approximately 2% from 8.28 Yuan/ US$ to 8.11 Yuan/ US$. Probably of more significance than the modest revaluation, was the move to a more “floating” exchange rate based upon a basket of currencies.

According to the articles that I have read regarding these two events, the impact on the North American economy will be modest. It was generally agreed, however, that short of a majority economic upheaval, this revaluation is the first of many to come.

I have been reading many articles over the past few weeks, as I am sure others have, regarding the recent acquisition bid by the Chinese CNOOC energy company for Unocal. As one would expect, the opinions range from “this is a disaster” to “let’s play fair”. May be because of my ancestry and overseas experience, I tend to lean towards the “lets play fair” end of the spectrum.

Is it reasonable to expect or assume that China will always be satisfied to be the “cheap labor” source for the benefit of the USA and European consumption driven economy?? Is it not reasonable for the Chinese to also want to attain the same economic level as other developed nations?? If the USA and Europe desire free access to invest in the Chinese market, why should the Chinese be restricted from investing in the USA’s commercial enterprises??

As many of us remember, these same concerns were expressed earlier regarding Japanese and Korean investments. I suspect that they will be expressed again in the future as India, Brazil and Chile become stronger competitors. I believe that the basis for these fears is the belief that this is a “zero sums” global economy. Someone get stronger, someone else must get weaker. This same fear is translated on to the individual company level … if the Chinese can compete in the North American market with their unfair “labor” advantage; there will be less for us. I suggest that the appropriate strategy is a proactive “partnership” arrangement, where the competitive value add of each partner is use to leverage competitive access to the global market.