Opinion: June 2008 Archives
According to a report by the Renmin University of China and Donghai Securities, the Chinese economy has just peaked.
From the People's Daily, this report envisages China to be on the verge of a systematic slowdown after decades of unsurpassed economic growth. Due to a deteriorating external environment and a tightening of domestic policy, China's economy is forecast to grow at a slower rate of 10.4% in 2008, presumably the first indication of a sustained weakening of economic growth. The current situation also has the (Chinese) editors of the Economic Observer slightly worried, and for them too 2008 is the year in which the ideal track of the Chinese economy has been broken with slower growth, inflation and unemployment, intertwined with surging oil and food prices and a depreciating dollar - contributing to fewer Chinese exports during the first four months of 2008. Yet there are solid grounds for remaining confident, the editors conclude, as recent figures suggest that China's exports of primary, low-cost processing and low-value-added products have decreased, while exports of high-tech products have increased significantly, indicating a steady improvement of China's export structure.
Reflecting on the Chinese economy's ability over the years to overcome a host of obstacles in continuing to register double digit growth, Richard Brubaker at All Roads Lead to China recently pointed to another 'Is the China story over?' type of article, this time from The Motley Fool, whose authors traveled to Xi'an to see the real China and concluded that the China story is clearly far from over. Irrespective of the opulence of cities like Beijing and Shanghai, there is still a long way to go in improving the financial lives of all of China's 1.3 billion people, and with large developments planned a second-tier city like Xi'an (the designated center for westward migration in China) is destined to be a very different city in a few years. Thus the trajectory of the China story is more poignantly reflected in World Bank statistics compiled by Mark J. Perry at Seeking Alpha: Economic reforms from 1978 have helped lift 635 million Chinese people out of poverty, from 839 million in 1981 to 204 million in 2005, with the poverty rate falling from 53% in 1981 to 8% in 2001. (China's story would be incomplete, however, without inevitably assessing the grave ecological costs that rapid economic growth has entailed, as Gaoming Jiang recently did at China Dialogue).
Reflecting thus the broader trajectory of an evolving Chinese economy, the dynamics of low-cost sourcing from China is inexorably changing as well. Analyzing the logistical complexities of utilizing cheaper production in developing nations, Robert J. Bowman at Supply Chain Brain (h/t E-Sourcing Forum) last month emphasized the rising costs of raw materials and labour in China, with the latter being a sign of a growing middle class with new wage demands. Hence, Bowman writes, multinationals in search of cheap labour are moving into less-developed countries, a process which results in further delays and logistical headaches in the supply chain.
As the China story unfolds, however, it is clear that China might eventually completely price itself out of low-cost country sourcing, and when that happens it will form part of a remarkable Chinese story of economic growth and development, often against significant odds, and undoubtedly at great ecological cost, yet ultimately an astounding human achievement.
From the People's Daily, this report envisages China to be on the verge of a systematic slowdown after decades of unsurpassed economic growth. Due to a deteriorating external environment and a tightening of domestic policy, China's economy is forecast to grow at a slower rate of 10.4% in 2008, presumably the first indication of a sustained weakening of economic growth. The current situation also has the (Chinese) editors of the Economic Observer slightly worried, and for them too 2008 is the year in which the ideal track of the Chinese economy has been broken with slower growth, inflation and unemployment, intertwined with surging oil and food prices and a depreciating dollar - contributing to fewer Chinese exports during the first four months of 2008. Yet there are solid grounds for remaining confident, the editors conclude, as recent figures suggest that China's exports of primary, low-cost processing and low-value-added products have decreased, while exports of high-tech products have increased significantly, indicating a steady improvement of China's export structure.
Reflecting on the Chinese economy's ability over the years to overcome a host of obstacles in continuing to register double digit growth, Richard Brubaker at All Roads Lead to China recently pointed to another 'Is the China story over?' type of article, this time from The Motley Fool, whose authors traveled to Xi'an to see the real China and concluded that the China story is clearly far from over. Irrespective of the opulence of cities like Beijing and Shanghai, there is still a long way to go in improving the financial lives of all of China's 1.3 billion people, and with large developments planned a second-tier city like Xi'an (the designated center for westward migration in China) is destined to be a very different city in a few years. Thus the trajectory of the China story is more poignantly reflected in World Bank statistics compiled by Mark J. Perry at Seeking Alpha: Economic reforms from 1978 have helped lift 635 million Chinese people out of poverty, from 839 million in 1981 to 204 million in 2005, with the poverty rate falling from 53% in 1981 to 8% in 2001. (China's story would be incomplete, however, without inevitably assessing the grave ecological costs that rapid economic growth has entailed, as Gaoming Jiang recently did at China Dialogue).
Reflecting thus the broader trajectory of an evolving Chinese economy, the dynamics of low-cost sourcing from China is inexorably changing as well. Analyzing the logistical complexities of utilizing cheaper production in developing nations, Robert J. Bowman at Supply Chain Brain (h/t E-Sourcing Forum) last month emphasized the rising costs of raw materials and labour in China, with the latter being a sign of a growing middle class with new wage demands. Hence, Bowman writes, multinationals in search of cheap labour are moving into less-developed countries, a process which results in further delays and logistical headaches in the supply chain.
As the China story unfolds, however, it is clear that China might eventually completely price itself out of low-cost country sourcing, and when that happens it will form part of a remarkable Chinese story of economic growth and development, often against significant odds, and undoubtedly at great ecological cost, yet ultimately an astounding human achievement.
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