Blog.7 CHINA, long time no see.

CHINA, long time no see.

Being a beneficiary of the cheap labour price for decades, China has been at the brink to lose this advantage. Inevitably, China’s booming and evolving economy has been driving up domestic manufacturing costs, a remarkable part of which are wages. Both the inflation and appreciation of YUAN render China a less desirable choice for producing, while China’s surrounding countries, like Vietnam, seems more preferable in terms of much lower wages. Therefore, according to the conventional notion, China must face with a dilemma where losing its manufacturing charm heralds a potential sharp decline in export and a likely crash of economy (because the unbalanced economic structure partly caused by not much changed over-reliance on export). Despite the unbalanced economy, luckily, manufacturing is by no means all about costs. Compared with other lower-cost south-eastern Asian countries, sophisticate labours, the giant scale and much complete infrastructures make it hard to find a substitute of China. Thus, it might be the end of cheap China, but not the end of China.

China’s trade surplus with America remains large and controversial, but its current-account surplus with the rest of the world is dying out. Meanwhile, China’s own investment expenditure rises. However, the surplus could widen again. Partly, on the ground that its investment could set the stage for a renewed export boom and partly, that the investment rate cannot be justified by slow-rising consumption. The future of China’s export monster depends on whether China’s high investment rate is sustainable. Many think it is not. And it is intriguing to notice that the world’s fear of China is being replaced by fears for China.