It has been generally assumed that manufacturing and exports are absolutely critical to China’s future GDP expansion. However, one concern about this advance is that the success of these businesses has caused widespread agitation for higher wages. Even President Obama recently said the price of Chinese labor would cause a return of manufacturing to America. It is not so simple. America does not have China’s manufacturing infrastructure, although it once did. The U.S. would need years to create the capacity. Nonetheless, wages have become a problem in China. Nothing solves that problem more than slower growth.
China’s central government will make money more available, as a means to cushion a slow economy. Access to capital will help the manufacturing sector build for the time when the global economy needs it, while current slow growth will cap wage increases. The formula is not as good as outright growth, but it is a reasonable bridge. Global GDP will not remain halting forever. In fact, consumer and business activity in the $14 trillion U.S. economy has already gained speed. That will not entirely offset problems in Europe, but it gives China a ready and improving market.
China is in the midst of a fairly serious contraction of its manufacturing sector, which has no precedent in recent years. But there are some silver linings that could keep the People’s Republic from a landing that is entirely hard.
Douglas A. McIntyre
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