China boom under threat?

Interesting article from The Times here on the future state of China's industrial revolution.

Anyone who has an interest in China should read this article. The Times has staked its thoughts on China's future and more people are coming around to this way of thinking; Can China's growth continue?

To look at this subject is a whole book, but in brief I will look at a few of the important challenges facing China.

Rising labour costs:
While China has traditionally been a low end/cheap manufacturer its labour force is starting to demand higher and higher wages. This affects consumers in the west as either (a) costs of products will increase or (b) corporate/manufacturers will have to accept lower profits.

Obviously, the impact in China is that companies may take their factories to other countries. The issue for the Chinese government is that now the proverbial genie is out of the bottle they will need those low wage jobs as well as work for the middle classes.

Recently the BBC featured an article on a 5 year old boy kidnapped to work in a brick factory. Serious enough you may say, but this is not an isolated case.

As above, a key issue for China is crime and standards. More and more the government is struggling to keep up with organised crime, poor manufacturing standards and increasing wage costs. Again, if China is to keep its growth on track it needs to tackle the rampant crime and failing standards quickly to catch up with the West as well as places such as Indonesia and Taiwan.

The Government:
Is China communist or is it capitalist? Does it follow the Russian model or the Hong Kong one? While on the outside China has been communist the leaders are rapidly having to look to the future. 10 years ago economic success seemed like a good way forward for the communists. The more that people were working, the less they would look at their political leaders. Alas we now see that this theory was naive and has not worked out that way.

More and more the Chinese middle class (although establishing) is itself looking at what benefits the state provides. Even the state run media carries stories questioning whether the government is putting to much effort into the Beijing Olympics and not enough into the share scandals of late.

The only thing for sure is that China will be an economic powerhouse. I for one am very happy to be here to watch what happens.

2 Responses to "China boom under threat?"

Paul says
24 June 2007 at 02:15

I think the industrialisation of China will take decades more and for The Times to be trying to pick the top is a waste of time. Look at how long it took the UK and USA to Industrialise - perhaps a 100 years or so. Granted things seem to move faster these days but the full industrialisation of a nation like China is going to take time

962 says
25 June 2007 at 01:37

Chinas biggest problem is that the companies it encouraged into the country on the back of cheap labour often have never been able to make a profit. They will leave.
Secondly China has little in the way of natural resources except labour and as transporation costs rise so other martkets become more competitive.
Finally whether is next month, next year, next decade the lid cannot be held on the bottle for ever, and when that happens you may end up with many Chinas, with big bussiness leaving.
China is growing on the back of Europe and Americas ability to borrow from China to fund its imports from China, that is a situation that cannot continue, somebody will have to pay the piper sooner or later.