A few days into the new year, the workers of electronics maker Unico learned the hard way about the brute force of China's industrial revolution.
The Malaysian firm had been providing computer motherboards to chip giant Intel Corp, which runs a big assembly plant just down the road, when a Chinese rival grabbed the contract by offering to do the job for about half the price.
At a stroke, half of Unico's 1,600 workforce was laid off.
"We make very good products -- high quality, fast delivery. Unfortunately, China's running a lot cheaper than us. That's the name of the game," said Alex Soon, Unico's chief financial officer.
It's a game that's being played at breakneck speed across Asia. Hardly a day goes by without a company announcing plans to open a plant in China to tap into the country's unbeatably low labor costs and fast-growing market of 1.3 billion consumers.
For all the dislocations that China's emergence as the workshop of the world is causing, people in Penang at least show remarkably little bitterness toward it.
"We were in the same position in the seventies as China is today," said K. Veeriah, the Penang secretary of the Malaysian Trades Union Congress.
"We've come full circle. A lot of people don't understand the impact that China is going to have over the next five years, but I don't think there's any resentment," Veeriah said.
Indeed, if China's rivals respond nimbly by developing new skills, they should be able to carve out niches in higher-margin industries where China cannot compete and take advantage of rising Chinese demand for tourism, health and education services.
Last week, US-based computer hard-disk-drive maker Maxtor Corp flagged job losses among its Singapore workforce of 8,000 once a US$115 million plant it plans to build in Suzhou comes on stream in 2005.
But a day earlier Mandarin Oriental Hotel Group said it planned a second upscale hotel in Hong Kong to cater to the growing number of visitors from China.
China already has a voracious appetite for energy, commodities, raw materials and equipment to feed its industrial machine, leading Jim Walker, chief economist at CLSA Emerging Markets, to call it the golden goose of the global economy.
Japan believes China has an unfair advantage by artificially holding down its yuan, which is pegged at around 8.28 per dollar, and wants a revaluation that would curb its exports and thus boost Japan's economy which has been sluggish since the Asian economic crisis of the 1990s.
But Walker argues that would kill the China goose -- cutting China's export income would reduce its demand for imports.
"What would we all rather have -- a moribund but competitive Japan or a competitive and dynamic China? The question is rhetorical because the answer is so obvious," Walker said.
"China is on the move and it is a massive benefit for everyone in the global economy" he said in a note to clients.
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