One story about China of particular note was an Economist article on the situation of labour in China. The increasing cost of labour in the coastal areas is creating ever more incentive for the movement of less skilled work into inland China, and that this will see/and is the result of the coastal provinces continuing their steady rise up the value chain. This process has been ongoing, and will allow (in principle) for China to maintain economic growth for a long time yet, all the while without losing the ability to compete in the lower value added industries on which its initial success was founded.
For the rest of the world, this ability to manage a transition from low value added to high value added whilst retaining the former, presents an ongoing problem for competitors. This is the key difference between the emergence of China and countries like Japan, South Korea and Taiwan; the depth of China's labour market. This depth will allow China to compete in every segment for a long while yet, allowing an ever greater dominance of Chinese exports.
Another aspect of the Economist article that was interesting was the concentration of strikes in China in foreign enterprises, reflecting points I made a long, long time ago. The point in question was the way in which China seeks to bring in foreign investment, methods and technology, whilst at the same time weighting the dice against the foreign companies. In the case of strikes, the authorities seem very willing to look on (and take no action) in the case of strikes in foreign companies, but far less willing to tolerate stikes within domestic enterprises. In a post I made a long time ago, I pointed out the many ways in which China sought to disadvantage foreign companies, and it seems the policy is ongoing.
Although in some respects investing in business in China is a risky choice, China is managing to weight the dice even further in their favour. A while ago, I discussed rare earth metals, and that China (which is the dominant producer) was seeking to restrict exports. This is a recent article on the subject:
The United States Magnetic Materials Association (“USMMA”), a trade association representing domestic high performance magnet producers and suppliers, today warned of impending shortages of rare earth materials needed to support domestic manufacturing in support of emerging green technologies like wind generation, hybrid vehicles, and new battery development, high-tech consumer products like mobile phones, PDAs, MP3s, and national security and defense systems.
Late last week, China, the world’s largest rare earths producer, announced new plans to cut rare earth export quotas by 72 percent for the second half of the year. According to China’s Ministry of Commerce, foreign shipments will be capped at 7,976 metric tons, down from 28,417 tons for the same period last year.
(1) HSBC Research, 29 July, 2010, China Economic Spotlight,