http://www.economist.com/node/21549956
China is the world’s largest manufacturing power. Its output of televisions, smartphones, steel pipes and other things you can drop on your foot surpassed America’s in 2010. China now accounts for a fifth of global manufacturing. Its factories have made so much, so cheaply that they have curbed inflation in many of its trading partners. But the era of cheap China may be drawing to a close.
China has a manufacturing system that is difficult to replicate elsewhere, mainly due to the cheap labor cost. However as salaries raise for manufacturing will China be in a good bargaining position towards consuming countries in the West? Will we see Chinese exports to the West decrease? I believe so, this could actually be a good thing as people in the US choose domestic manufacturing over abroad. On the other hand, transportation cost have been rising and (in many cases) have negated the lower labor cost of a distant country.
9 comments:
It is an interesting article to read, but I have to say that the author has almost no knowledge about the social structure of China at all. I remember discussing with Dr. Vegel last time about this issue. It was pretty obvious that the currently congregated cheap labor who are working for international companies are in the sea coastal area. It is only a line of China. The infrastructure, especially the Yangzi River transportation and the high speed rail way across all over China has provided sufficient opportunity for those industries to transport to the inner mainland, which up to today, is almost undeveloped compared to the coastal area. It might take decades and decades to exhaust the huge labor. However, I don't see cheap labor a long term advantage for Chinese government to exploit. There has to be other strategy for the country to keep up growing.
As the available labor falls and costs go up, companies aren't going to move to production in the US. Not as a first step anyways. There are other countries with large populations that will work for as little as the Chinese do. The LDCs don't typically have the labor laws or minimum wages imposed in the US, which is what makes them attractive to foreign investment.
Right now companies are opting to stay in China. So the question becomes "when will Vietnam and Co. improve their supply chains to take business away from China?
But if China's wage growth continues, it seems likely that businesses will go elsewhere. A doubling of costs might not be enough, but where is the line? A tripling? Quadrupling? Companies will break at some point. And once manufacturing leaves China (in part), there will be unemployment and mass civil unrest.
I think this is good, I hope America cannot find anymore cheap foreign labor so factories open back up in America. Have America's outputs become closer to their inputs.
China is becoming more expense for manufacturers because of higher land prices, environmental and safety regulations and taxes. As prices in China continue to rise there will be new opportunities to produce less expensively in other countries and i believe that companies will begin to move to those other countries for production.
I agree with the above statement. China is a very powerful developed country, however with its regulations and high land prices, it seems that many businesses may start looking elsewhere to begin new projects. However, I think that China will still remain an economy to watch, and even with companies potentially moving out, I do think that China will continue to grow and possibly merge with companies to make up for high costs.
I disagree with Lena.
China is NOT a developed country. The living condition of the majority of Chinese population still falls far behind that of the developed countries. Similarly, high land prices only occur in metropolitan areas whereas China still has many agriculture land that can be converted for industrial development.
Yes, wages in China will grow eventually. However, it's not in the near future.
I hope so, but I don't think China is not that close to an extensive economy.
With out proper copyright law and knowledge protection policy, a technology-base economy cannot be attained. There is still a long way to go for China.
I agree with Scarlet (Sijia). I think that there is still a very long way to go for China. However, that being said, there has still been a lot of progress and a lot more that can happen as infrastructure grows.
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