April 3, 2006

LOSING ITS ONLY ADVANTAGE:

Labor Shortage in China May Lead to Trade Shift (DAVID BARBOZA, 4/03/06, NY Times)

Persistent labor shortages at hundreds of Chinese factories have led experts to conclude that the economy is undergoing a profound change that will ripple through the global market for manufactured goods.

The shortage of workers is pushing up wages and swelling the ranks of the country's middle class, and it could make Chinese-made products less of a bargain worldwide. International manufacturers are already talking about moving factories to lower-cost countries like Vietnam.

At the Well Brain factory here in one of China's special economic zones, the changes are clear. Over the last year, Well Brain, a midsize producer of small electric appliances like hair rollers, coffee makers and hot plates, has raised salaries, improved benefits and even dispatched a team of recruiters to find workers in the countryside.


The Cultural Revolution is going, in retrospect, to look like the Boston Tea Party.

Posted by Orrin Judd at April 3, 2006 9:01 AM
Comments

Sorry - you lost me ... the Boston Tea Party was a highly symbolic action that did neglible economic damage to the British crown but was a significant propaganda victory for the American Independentists. The Cultural Revolution is similar how?

Posted by: Rick Smith at April 3, 2006 10:32 AM

comparatively "neglible...damage" to what's coming

Posted by: oj at April 3, 2006 10:35 AM

One of the sensible things Greenspan did was fail to raise interest rates when US unemployment was low, in contradiction of conventional wisdom. I believe this was correct partly because China, with it's currency tied to the dollar, was effectively part of the US economy, and the combined US/China labor market still had plenty of room (as we saw).

In light of this, the current bump in interest rates may be wise, after all...

Posted by: Mike Earl at April 3, 2006 11:51 AM

China is our manufacturing sector now and it's worked out great. We get cheap, well made goods and they get to build a middle class. Soon their workers won't want to do repetitive manufacturing jobs, so we'll move on to develop a new manufacturing sector and Chinese middle class will move on up to the next level. One thing they're lucky about, they din't have to deal with unions.

Who said people can't learn from history

Posted by: erp at April 3, 2006 2:03 PM

It takes a Communist to run out of cheap labor in China.

Posted by: Bob Hawkins at April 3, 2006 2:16 PM

Bob,

Which is why Indonesia and the Phillipines sit right down the road, so to speak.

Posted by: Brad S at April 3, 2006 2:28 PM

OJ, so how is this a problem for China? When we become too prosperous to compete with cheap manufacturing labor, it's a good thing. When the Chinese do, it's bad?

Posted by: Robert Duquette at April 4, 2006 12:49 AM
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