Over the past three decades, consumers
have grown used to seeing the “Made in China” label adorning their less
expensive purchases. Once China opened its economy to international
trade and investment in the 1980s, it did not take long for it to wrest
domination of the lower-end manufacturing sector from its East Asian
neighbours and flood the world’s high streets with cheap goods.
Low wages were at the heart of China’s
success. The majority of the population lived on less than a dollar a
day, so businesses had no need to pay high salaries. Combined with high
productivity, this enabled them to undercut manufacturers in more
advanced economies.
As China has grown wealthier and wages
have increased, however, this advantage is eroding. Higher wages render
Chinese producers less competitive in low-value, labour-intensive
manufacturing, but they are unlikely to want to relinquish control over
the lucrative cheap goods market. Higher technology products contain
many low technology components and China will need a supply of such
inputs as its economy becomes more sophisticated. To whom will it turn
to fill its shoes?
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