Domestic consumption is the key

I do not understand why somethings that are stone cold obvious to me, but yet no one is acting on it.

We have the big US and Europe companies complaining about China not buying more goods from their respective countries. First of all, have they look at their respective practices before they made the claim that China is intentionally keeping their currencies low?

The big MNCs are setting up factories in China because of only one reason... It's cheap. The labour cost is much cheaper than setting it up in their domestic countries. However, it seems that the people in China that are hired by these big MNCs are paid the China market rate, which barely covers inflation in China. If these people are paid minimally, how on earth can they afford the goods imported from Europe and USA?

The CEOs and upper management of these big MNCs will then reap big bonuses and salary hikes for the perceived better operational performance. They will in turn use these bonuses to buy more imported goods, which comes mostly from where? China.

On the other hand, the workers in China will still toil for these big MNCs, with no such salary hikes and bonuses. I have not read any news where MNCs give big bonuses to the lower rung of the hierarchy. These china workers will just worry about their day to day living, and would not even dream of buying US and Europe goods.

Now from this viewpoint, who is at fault now for causing the trade imbalance? I won't say China is not at fault for causing part of the problem due to the export tariffs, but they have gradually eliminated most of it. China imports have grown, but not as much as China exports. I could only see one conclusion from this, which is that the China workers are not paid well enough to afford US and Europe goods.

I understand that the whole point of outsourcing is to lower costs, but one must always look at the bigger picture. You treat the workers well, share the profits, and in a way, the profit will come back to you. This will increase domestic consumption, and it will lead to a virtuous cycle.

This problem in a way also applies to Singapore. I do not need to mention who is the biggest consumer of services here. However, look at the tender bid amounts for projects and you know that they are cutting corners. They cut corners with the domestic businesses, thereby boosting their own bottom line. After that, they complain that Singaporeans are not spending enough to raise domestic consumption. This is .... .... If they stop giving big bonuses to their upper management and start to give more to the lower rung, and they are willing to pay for quality work, then we won't have this domestic consumption problem. It's not that we do not want to spend, its because we could not afford to at all! It doesn't help that those "people up there" seems to be very detached from what's happening at the ground level. Yet, they said that they cannot figure out why is there an income disparity! Come on man.... It's obvious why!

This blaming game reminds me of the previous conversation I had with someone in Jakarta, which I have posted here. Sadly that's the way of life, where almost everyone only thinks for themselves. With these kind of mentality, there will be no more innovations for the next decade.