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UBS Economist Jonathan Anderson, a sharp analyst of the Chinese economy, believes he's uncovered a “pretty convincing turning point” in China's development model. For decades, Beijing has relied on super-low wages to win a bigger slice of global exports and help turn a poor country into the world's second largest economy.
But for the past 24 months, Mr. Anderson says in a new report, China’s share of low-end light manufacturing imports into the U.S. and European Union “has peaked” at around 50% of those markets. In the U.S. market, Vietnam, Bangladesh, Indonesia and Mexico are picking up market share at China's expense. In the EU, it's those Asian nations along with Poland, the Czech Republic and Hungary.
It's difficult to come up with a definitive count of “low-end” manufacturing. Mr. Anderson uses trade data labeled “miscellaneous manufacturing items” as a surrogate. That category includes toys, clothing, footwear, furniture and sporting goods, among other items.
In the U.S. market, Mr. Anderson says Vietnam, Bangladesh and Indonesia are getting a bigger slice of the clothing and footwear the U.S. imports, while Mexico is picking up market share in furniture.
For China, the market-share loss is, in some ways, the predictable outcome of government policy to sharply raise minimum wages and employer recognition that they must pay higher wages to keep assembly lines full. Chinese officials also know they need to shift their export efforts to more innovative, higher profit goods and services. That means the cheapest labor jobs are headed out of China.
But China also has hundreds of millions of impoverished rural farm workers for whom low-wage factory jobs could be a step upward. If those factory jobs move in large numbers overseas, China's ability to sustain its double-digit annual growth may be endangered. The pressure on Chinese government officials to engineer a shift so the economy relies more on domestic demand and less on exports is bound to intensify.
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DAJEVUE we been there and done that all I can say is welcome to the real world china .soon to come to china is unions and labor boards to help make inflation a fact of life .
This is very interesting, how do wages affect the countries ability to grow. I think wage growth will be contained by the simple law that people will want and need jobs. Read a great post about China at: http://ihaveoptions.blogspot.com/2011/08/wheres-china-heading.html
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Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal’s Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com.
Read more Economics coverage.
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UBS Economist Jonathan Anderson, a sharp analyst of the Chinese economy, believes he's uncovered a “pretty convincing turning point” in China's development model. For decades, Beijing has relied on super-low wages to win a bigger slice of global exports and help turn a poor country into the world's second largest economy.
But for the past 24 months, Mr. Anderson says in a new report, China’s share of low-end light manufacturing imports into the U.S. and European Union “has peaked” at around 50% of those markets. In the U.S. market, Vietnam, Bangladesh, Indonesia and Mexico are picking up market share at China's expense. In the EU, it's those Asian nations along with Poland, the Czech Republic and Hungary.
It's difficult to come up with a definitive count of “low-end” manufacturing. Mr. Anderson uses trade data labeled “miscellaneous manufacturing items” as a surrogate. That category includes toys, clothing, footwear, furniture and sporting goods, among other items.
In the U.S. market, Mr. Anderson says Vietnam, Bangladesh and Indonesia are getting a bigger slice of the clothing and footwear the U.S. imports, while Mexico is picking up market share in furniture.
For China, the market-share loss is, in some ways, the predictable outcome of government policy to sharply raise minimum wages and employer recognition that they must pay higher wages to keep assembly lines full. Chinese officials also know they need to shift their export efforts to more innovative, higher profit goods and services. That means the cheapest labor jobs are headed out of China.
But China also has hundreds of millions of impoverished rural farm workers for whom low-wage factory jobs could be a step upward. If those factory jobs move in large numbers overseas, China's ability to sustain its double-digit annual growth may be endangered. The pressure on Chinese government officials to engineer a shift so the economy relies more on domestic demand and less on exports is bound to intensify.
MySpace
Digg
del.icio.us
StumbleUpon
Error message
DAJEVUE we been there and done that all I can say is welcome to the real world china .soon to come to china is unions and labor boards to help make inflation a fact of life .
This is very interesting, how do wages affect the countries ability to grow. I think wage growth will be contained by the simple law that people will want and need jobs. Read a great post about China at: http://ihaveoptions.blogspot.com/2011/08/wheres-china-heading.html
Subscriber Content Read Preview
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Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal’s Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com.
Read more Economics coverage.
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