Bye-Bye Cheap Chinese Labor

The way the world economy has been functioning for the past 20 years is going to be torn apart within the next 10!!!! It's just so amazing to be able to actually see these changes occur. How exciting is it to be able to witness an entire half of the world come into its own in your lifetime? In my lifetime, China, and probably its surrounding countries are going to become what we are now. No doubt about it. China's unspoken trade alliance with Brazil will skyrocket Brazil up with all of the surrounding countries!!! I'm going to witness an amazing shift in world power!!!!!! And I'd bet anything that my children will see the birth of the African countries, not as emerging nations, but as 100% developed, international trade powers! HAHA!!!!!!!!!!!!!

Okay...
So, there was an article I read online at The Economist's website that was posted Thursday, the 4th. It was called Reserve Army of Underemployed and discussed the causes of the rising wages in China. I don't have anywhere near enough information to debate that, but one economist was saying that the labor force is decreasing. Wages go up because companies are competing for employment because the population is dropping. Another one said that the wage increase is just because the industrial companies need more labor and have to raise wages to get it because the government handles their rural industries so well that they end up paying better.

That, however, is not my point....
Wages are going up in China. Now, why, for the past... oh 5 or 10 years, have businesses been outsourcing to China?
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Cheap labor.


NOT ANYMORE


haha....
so what are we gonna do!? wow, this is so great... our world is changing, so drastically.
So yea, my point. What are the United States firms going to do? I mean, I don't really know what percentage of our firms outsource manufacturing to China (something I'll have to look up), but it's got to be a pretty large number. I'm sure that most firms will probably just start outsourcing elsewhere, like eastern Europe, but those countries might be rising fairly soon as well. Unfortunately, I do not think that these firms will bring jobs back to the United States when labor prices get too high in china. I'll be anything they'll just outsource somewhere else. However, by the time that happens, our generations here may be more interested in leaving the United States. Not necessarily leaving for good, but leaving for work. You can see that as younger generations get older, they're more interested in working overseas. Who knows, maybe we'll see a mass migration of United States labor leave the country. I don't know how good that will leave our nation's economy... but we'll see.

yay.....

Surprise surprise, the media has reached China. Once again, journalists are overexaggerating facts without looking at the whole picture and obviously without even having the most basic understanding of economics.

Everyone is saying that China is entering a recession, which they're not. I'm sorry to disappoint you.

China's growth rate has fallen. However, no country would have possibly been able to maintain the rate that it was at (12%). Everyone assumes that growth is good, but no one really understands what growth is. Ask your self, what is growth?

Seriously, ask. Take a good long time to think of it and see if you can really define "Growth".

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Anything? Well, growth has a lot of different aspects. Growth usually seems to refer to an increase in business. An actual physical increase in the amount of businesses. This leads to competition which yields lower prices and higher wages. However, you can't continue to add an infinite number of businesses to your nation. A country has its limit. When that happens, prices begin to rise because competition no longer increasing, it's still there, but not getting more difficult. This also makes up for the wages that a business is now paying. The problem is that if this goes on for too long, prices will start to overtake wages and I can promise you that it will take decades for companies to start attributing that rise in revenue to their workers' actual payroll. That's where you hit problems like we're beginning to see in the United States. Rising prices, level or dropping wages. It's the way free-market works, it's a curve that constantly peaks up and down.

So what's so wrong with the Chinese economy slowing down? They were growing at 12%/year in 2006. They're lucky they haven't hit a pricing crisis (that could even be due to their population). They're economy is slowing down just as wages are beginning to increase. This is great, because maybe, just maybe, if their economy slows down enough, they can keep the wages they have now without the worry of future rising prices.

Guess what it's slowed down to?

8%.



The average growth rate of the United States has been 2.7% since 2001, peaking in 2005 at around 4.5% (Yes, believe it or not or economy was still growing after 9/11).

Now tell me... do you think China is hitting a recession? Their exports have decreased, yes, but we already went over that in the post before. Rising wages mean rising costs of production. That just means they're going to become like the United States is today: buyers. They'll still get FDI from all over the world. But instead of production, retail companies are going to be looking to sell as much as possible within China to their growing population with growing wages and growing spending power.

How is that heading into recession?
They're country isn't dying out, it's changing. And it's doing way better at it than we (The United States) did.

They're still growing almost 4 times the rate we are. That, my friends, is not "Grim economic data [...]"

http://www.reuters.com/article/topNews/idUSTRE49N5VU20081111
http://www.chinability.com/GDP.htm
http://www.econbrowser.com/archives/2008/10/middle_kingdom.html
http://www.house.gov/jec/publications/109/rr109-25.pdf
http://www.indexmundi.com/united_states/gdp_real_growth_rate.html