Opportunities and challenges in China

Walter Russell Mead is travelling in China. As all travelers know, this produces lots of insight. I still cherish the learning time I experienced during a number of overseas field audits for a client. But I digress.

In Chasing China Up The Food Chain, Mr Mead says:

The other day I was looking for a pair of gym shorts in Guangzhou and stopped at a sporting goods store. I found some — with a label proudly advertising “Made in Thailand.”

I’ve long read that manufacturers looking for the lowest cost are now building in Vietnam and Cambodia. That is a very serious problem for China.

The solution? Mr. Mead reports that as in the United States, China is moving towards automation. This allows higher value labor which will draw more manufacturers.  The downside?  There is far less lower-skilled work to do.  That creates its own problems as millions of unskilled people migrate.

China is facing its own version of a scissors crisis: low wage competition and high-tech automation will make it harder to provide secure jobs and rising wages for the hundreds of millions of people expected to move from the country to the city in the decades to come.

Mr Mead closes with:

The gym shorts, by the way, were well made and attractively priced.

In China Struggles To Assist The Young Generation, Mr Mead describes the impact food and property inflation is having on the growing ranks of young professionals.  Inflation makes it increasingly difficult for them to buy an apartment.  Mr. Mead says this will make it more difficult to then start a family. This is causing increased frustration amongst recent college graduates.

The migration of workers from rural to urban areas is expected to continue for a long time. People just graduating from university want to start a career and family.  Both trends create a lot of pressure on the government to keep the economy booming.

Unemployed and underemployed college grads unable to launch their careers or buy homes and start families and economically marginal migrant workers looking for and not always finding a foothold in urban life: this is an explosive mix and the Chinese authorities know it.

Mr. Mead closes with a comment that sustained 10% growth in the Chinese economy will provide good opportunities for migrants and college grads. But how long can that continue? The really dangerous time will be when the economy slows.

…more and more people here are asking what happens when the music stops?

I do not know how this will develop or what impact it will have on the rest of us.  This is the kind of background information we all need so we can be aware of the rapid change taking place around us.

Check out both posts. You will enjoy them.

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