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Subject: Potential US-China trade war and its effect on gaming rss

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Seth Owen
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Of course any China-U.S. trade war would have immense impacts outside the small world of gaming, but this is a gaming blog so that's our focus here.

Over at the Deseret News Jeff Thredgold makes this point: "However, there is an important and positive by-product of that undervalued yuan. Goods produced in China are more affordable to Americans, whether shopping at Walmart or Target or Forever 21 or other retailers.
The Chinese currency manipulation allows greater U.S. household purchasing power for Chinese-made goods … good news for U.S. households that are already under tremendous pressure from a very damaging recession and a weak U.S. economic recovery."


Bloomberg reports that "Nobel Prize-winning economist Paul Krugman said China is headed for a “trade conflict” with the U.S. and other western countries as tensions rise about how to rebalance the global economy.

“What China is doing is functionally equivalent to having large export subsidies and large import tariffs,” Krugman, 57, said in a speech in the Free University in Berlin. “If it were doing that in the normal way, it would automatically be subject to large countervailing duties. And I think that’s going to happen at the rate we’re going.”


For quite some time I've thought that gamers were going to have to adjust their expectations on how much bling was in their games. The decade of the aughts brought us all sorts of terrific games packed to the gills with stuff such as Battlelore, War of the Ring, Tide of Iron and many more. It was also a decade that brought us highly detailed and already painted collectible miniatures in vast numbers used in everything from Dungeons & Dragons and Heroclix to Axis & Allies Miniatures and Heroscape.

As much as a 40% increase in the value of the Chinese currency to the US dollar might help the US in macro terms, let there be no mistaking its effect on game bits - there won't be many, any more. Indeed, some product line may simply become unaffordable to produce and others will ave to scale back considerably. I think collectible painted miniatures, in particular, may become obsolete.

We're already seeing some hints of the coming reality. Fantasy Flight Games is still struggling with finding a way to bring the Battlelore Core Set back to market at an economically doable price. It's latest stopgap is to "repurpose" excess inventory of French-language copies for the English-language market. A welcome development but obviously a stopgap.

We're also seeing plastic being replaced by cardboard in more games. In the latest versions of Axis & Allies, for example, the industrial sites and anti-aircraft guns have been changed to counters.

The bottom line is that players who like a box chock full of plastic are going to find the future very disappointing as China "rebalances" the value of its currency with the rest of the world.

From my game blog: http://pawnderings.blogspot.com
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Pete Belli
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Interesting analysis.

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Perhaps some of those production facilities will leave China... other expanding economies in Asia or Eastern Europe could compete if the increased cost pushes the price of Chinese components higher.

Maybe some of that business could shift over to Jack over at Table Tactics; in my opinion his plastic stuff is top drawer merchandise.



I would cheerfully pay a higher price for a product with more components made in the USA.

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Hunga Dunga
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Personally, I don't believe there will be much of an effect.

Consider Scrabble tiles. They used to be made in the NorthEast. For years now, they've been cutting down maple trees, shipping them off to China, making the tiles there, and shipping them back here to be assembled into Scrabble games - and all that is still significantly cheaper than making them here. Any - long overdue - adjustment in the value of the yuan won't make Scrabble games, or any other game, more expensive.
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Seth Owen
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Hungadunga wrote:
Personally, I don't believe there will be much of an effect.

Consider Scrabble tiles. They used to be made in the NorthEast. For years now, they've been cutting down maple trees, shipping them off to China, making the tiles there, and shipping them back here to be assembled into Scrabble games - and all that is still significantly cheaper than making them here. Any - long overdue - adjustment in the value of the yuan won't make Scrabble games, or any other game, more expensive.


That's logically impossible. If the Chinese currency's value changes significantly (they're talking 40%, but even 10% would be a lot) then there must be a price impact. Games will get more expensive OR will contain less components and probably both.

There are ways companies could try to hold the line, such as turning to other low-cost countries, although there's considerable doubt anyone could replace China simply because of the scale.

Krugman and others seem to believe that the current arrangement is not sustainable and that there will be a big adjustment. The main question seems to be the speed and disruptive extent of the adjustment, but not whether it will happen.
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Richard Milner
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Games are cheap in the USA compared to the UK.
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Rick Rodrick
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How about increased use of recycled plastic for high quality game parts made in the United States? That would be a multiple win that could happen whatever happens with China!
 
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Ernesto Cabrera
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This is already a problem in Mexico, but it has to do with mexican policies rather than Chinese policies. In mexico all Chinese products have huge import taxes (up to 200%), specially toys, and remember that everyone else outside the hobby think that, for example, Heroscape is a toy.

I found out about this when I started my own store and struggling to get a distributor all the CCG distributors told me they COULD get boardgames but they had to either pay huge fees or pay "corruption" fees (what we mexicans call "a bite") to get the products illegally, neither of which is loable for distributors.

Of course, this thread is about the production prices, but I think it's the same, the prices will increase if boardgame producers don't change their distributors, but that sould've been done years ago when the quality standards were raised a few years ago...
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Seth Owen
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lestat2099 wrote:
This is already a problem in Mexico, but it has to do with mexican policies rather than Chinese policies. In mexico all Chinese products have huge import taxes (up to 200%), specially toys, and remember that everyone else outside the hobby think that, for example, Heroscape is a toy.

I found out about this when I started my own store and struggling to get a distributor all the CCG distributors told me they COULD get boardgames but they had to either pay huge fees or pay "corruption" fees (what we mexicans call "a bite") to get the products illegally, neither of which is loable for distributors.

Of course, this thread is about the production prices, but I think it's the same, the prices will increase if boardgame producers don't change their distributors, but that sould've been done years ago when the quality standards were raised a few years ago...


A trade war could see similar policies spreading. Mexico, of course, is another low-wage (relatively speaking) country and presumably they are trying to protect their domestic manufacturers from being undercut by the Chinese. This is a very common policy. Even the United States engaged in it when it was a a developing country. Naturally, once the US became a developed country it was in favor of "Free Trade."

I think that the 2000s were a misleading decade for consumers because they got used to certain price levels that were not necessarily the "real" price for a product but were an artifact of macroeconomic factors that were not stable.

Let me explain. Sometimes prices can drop because of increased productivity or improvements in technology. Electronics is an obvious and familiar example. Since the dawn of the electronics prices have been driven downward by improved technology and productivity gains. A century ago a phonograph player was a large and expensive piece of furniture. Today an iPad is a fashion accessory. This is a desirable state of affairs and protectionism is bad because all it does is retard the progress and productivity of your own industry.

Price differential caused by currency and standard-of-living disparities, however, are a different state of affairs and that's generally the situation with game manufacturing and the manufacturing of many other consumer products. Factories in China and other low-labor cost countries are not more efficient than similar factories in developed countries as a rule. It may be cheaper to pay three so-called low-cost workers to change a light bulb than one high-cost worker but it's not more efficient. The price differential, not being driven by better productivity, is not stable. As labor costs rise in the developing country and as currency policies change the price advantage will disappear.

Consider, for example, painted miniatures. Painting is a labor-intensive skilled task that can only be automated to a limited extent. A painted collectible miniature's real cost to make, all things being equal, is probably several dollars apiece. This is what people who custom paint pewter armies generally charge. They deal directly with the customer, however, and so there are not the usual additional levels of retail markups, If a retailer were to try selling this kind of a product he'd have to charge more than $10 apiece. Interestingly enough, if you look at Britain's prices (Britain is a famous maker of painted toy soldiers) they are retailing for $26 each right now.

Meanwhile collectible miniatures average between $2 and $3 each -- and people complain. While the Britain's pieces feature higher quality paint jobs, I don't think they are 10 times better than Heroscape, D&D miniatures, Heroclix or Axis & Allies miniatures.

The bottom line is that we've been enjoying (as gamers) an unusual window of opportunity to get lots of cool bits, often painted, at an unsustainable price and I think players will inevitably have to start readjusting their expectations accordingly.
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Maybe now the craft market for small game designers will take front and center. Maybe instead of looking for overproduced, under-innovative, over expensive games, now we'll see more innovative ideas that come from not having to paint it in plastic gold.

That is what is great about the boardgaming hobby over any other type of media...we have the ability to create wondrous things in our own garage. Something that used to be said about Video games in the late 80's early 90's.
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Are you recommending hoarding for profit?
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pete belli wrote:


I would cheerfully pay a higher price for a product with more components made in the USA.



I agree.........
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Northern Rommel
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I agree as well. I remember the day when things actually were made completely in North America for games. The price hike was not that extreme, and generally the quality of the goods made it a good thing to own.

It is also why any games I produce will be made or have parts made from Canada, USA, or Europe. The trade imbalance and willingness of companies to do things the "China way" is something we will all pay a heavy price for down the road. Its a shame it may take a complete collapse of the North American economy to see the light of that.



 
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The vast inequity in cost between goods manufactured in China and goods manufactured elsewhere has almost nothing to do with currency valuation. That is, at best, the icing on the economic cake. By far more important in determining the trade relationship in this dynamic is the cost of labor.

The real shakeup in the future will not be changes in the valuation of Chinese currency, but the average Chinese worker demanding a greater share of the profits of their labor. The greatest challenge to economic stability isn't these little discrepancies around the edges, like currency valuations, but rather how to manage the transition of the Chinese worker from exploited laborer to wealthy consumer.
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Eric Jome
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NorthernRommel wrote:
Its a shame it may take a complete collapse of the North American economy to see the light of that.


It is highly unlikely that a rise in Chinese economic power will produce any other result than fantastic wealth and peaceful prosperity for the entire world.

Indeed, it flies in the face of every historical example we have to suggest that the rise of one center of wealth ruins another center. The main way China will grow rich is through interaction with other rich partners, not in isolation nor in exploiting others.

In fact, the brilliant, beautiful gift of the globalized economy is that as long as you're participating in the market, you get everything you could ever want, sooner or later - peace, prosperity, respect. The only places you still see war and poverty are places where the people and states are disenfranchised from global economic trade.
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Eric Jome
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And, politics aside, I don't much need or even want any of the things that we've been getting in games lately. I don't care if it's a little cardboard chit or a prepainted little plastic man... I rather prefer the chits I think. So, heavily overproduced games we've been getting are a major turnoff to me personally. I'll be glad to see them gone if that means prices will come down.
 
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Seth Owen
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cosine wrote:
The vast inequity in cost between goods manufactured in China and goods manufactured elsewhere has almost nothing to do with currency valuation. That is, at best, the icing on the economic cake. By far more important in determining the trade relationship in this dynamic is the cost of labor.

The real shakeup in the future will not be changes in the valuation of Chinese currency, but the average Chinese worker demanding a greater share of the profits of their labor. The greatest challenge to economic stability isn't these little discrepancies around the edges, like currency valuations, but rather how to manage the transition of the Chinese worker from exploited laborer to wealthy consumer.


If the currency is devaoued as much as 40% from it's real value then that is a signifcant cost, not something around the edges. That said, I think you're right that the larger portion of the price has to do with the low cost of labor. The two factors are closely related, however, and the currency valuation issue, unlike the labor costs, is something that political action can address, so it will be in the news a lot.

 
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Kilkrazy wrote:
Games are cheap in the USA compared to the UK.
Games are cheap in the UK compared to the Australia.
 
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Quote:
The bottom line is that players who like a box chock full of plastic are going to find the future very disappointing as China "rebalances" the value of its currency with the rest of the world.


Makes me realize that what we've been calling "Ameritrash" should have been called "Chinatrash" all along.
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cosine wrote:
It is highly unlikely that a rise in Chinese economic power will produce any other result than fantastic wealth and peaceful prosperity for the entire world.

I agreed with everything you said, your other posts included, except for this. That prosperity will come with some sort of global price tag: increased demand... for whatever.

I'm sure the Chinese will not be as extreme about abusing their wealth in the manner the U.S. did (does), but either overall use of global resources will be ratcheted up a notch, some other countries in the global economy will start feeling the pinch of unbalanced rising prices, or production breakthroughs will keep pace with this expected wealth and prosperity. I won't hold my breath for that third option.
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Joey Konyha
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Quote:
The bottom line is that players who like a box chock full of plastic are going to find the future very disappointing as China "rebalances" the value of its currency with the rest of the world.


As someone who came of age with piles of cardboard chits, markers, and tokens from Avalon Hill my reaction is snore
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Seth Owen
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MonteCristo23 wrote:
Quote:
The bottom line is that players who like a box chock full of plastic are going to find the future very disappointing as China "rebalances" the value of its currency with the rest of the world.


As someone who came of age with piles of cardboard chits, markers, and tokens from Avalon Hill my reaction is snore


I'll go far as to suggest that wargames will be the genre least affected by this development. While there have been wargames that indulged in plastic bits, it's much less central. And wargamers seem more tolerant of cheaper quality components, as many BGG threads have pointed out.
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Northern Rommel
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cosine wrote:
In fact, the brilliant, beautiful gift of the globalized economy is that as long as you're participating in the market, you get everything you could ever want, sooner or later - peace, prosperity, respect. The only places you still see war and poverty are places where the people and states are disenfranchised from global economic trade.


I don't know what you are smoking friend,

Poverty is on the rise around the world due to world trade eroding first world economies and immigration of cheap labour.

People are being squashed under foot across the world as large corporations via for control of limited resources. Those are wars, call them otherwise if you wish. I think the old term was "rape and pillage". Same thing, different semantics.

We will see how much "peace" we get when the resource based wars come to our front doorstep.

The rich get richer and everyone else is getting screwed. I think that is evident to the majority of the population.

Please go get your eyes checked.
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pete belli wrote:


I would cheerfully pay a higher price for a product with more components made in the USA.



As I believe many of us would. That's really not the point though. If you have X amount of dollars that allow you to buy Y amount of games, the games at the bottom of the list don't get bought when the budget runs out.

Heck, even if the import prices increase, I'll still accept it. I'll gladly pay 20-30 dollars more for a straight up no cuts reprint of War of the Ring. However, the game that extra 20-30 was going to tack onto my order will sit on the seller shelf instead of mine, and in the long run that will hurt - and, if it's another FFG game that sits, it's not even a situation of robbing Peter to pay Paul, it's robbing Peter to pay Peter.
 
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