The future of China

Graeme Dobell at the Lowy Interpreter notes the report of the China Update conference – you can read the proceedings here.

Dobell is particularly interested in the work of Ross Garnaut (chapter 2 of the proceedings). The key finding?

There is now compelling evidence that the period of labour surplus andr easonably steady real wages for unskilled workers—supported by continuing large-scale movement of people from agriculture to industry and from the countryside to the cities—has come to an end. The implications of this change for all aspects of Chinese development will be profound.

It’s worth observing that this is, apparently, by no means a consensus position. The Economist‘s By Invitation page has several contributions suggesting otherwise: indeed, Yang Yao argues that this point is getting further away:

First, it cannot be made congruent with the fact that the countryside still has 45% of China’s labour force, but agriculture only contributes to 11% of China’s national GDP…Indeed, we find that China is moving away from the turning point, primarily because agriculture has become more mechanised and squeezed out labour.

While the exact timing may not yet be clear, sooner or later the “turning point” will be reached, and it sounds like it’s not that far away. The consequences not only for China, but the rest of the world, will indeed be profound.

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8 comments on “The future of China
  1. Graham Bell says:

    Guess what? China is changing. Changing much too fast for our dumb-bunnies – masquerading as policy makers and corporate high-flyers – to catch up.

    Me? I’m alright, Jack. I already speak a few words of Chinese and know a tiny little bit about Chinese history and culture …. so I’ll just sit back and be entertained by all our “leaders” fluffing around and wondering just what the heck happened. Beats watching World Cup, Master Chef and Tour-de-France.

    🙂 ha-ha-ha–hao

  2. Paul says:

    China will be a major player in the 21st Century no doubt. But the endless crowing of Sinophiles that ‘China will rule the world’ is an irritant in this debate.

    China has a great many problems and some serious problems facing it as it moves forward.

    1. Endemic group-think and corruption in the Communist Party throughout the country.
    2. A growing Middle Class that may well grow tired of being told what they can and can’t think/see/do by the head honchos in Beijing.
    3. No country can sustain the kind of regular environmental catastrophies that the Party has put its people through.
    4. The one-child policy is rapidly creating a demographic time bomb that will dwarf the baby-boomer problems of the West.
    5.The complete failure to develop world-class brands. Compare the high-tech powerhouse companies in Japan and Korea to China’s rather paltry native industries.
    6. The fact that an insane amount of the nation’s GDP is spent on just keeping the peasantry in line and satiated will continue to cripple genuine growth and innovation.
    7. The fact that the Party has hedged its bets on economic growth exceeding 10% indefinitely to support the programs it needs to keep it’s people happy.

    Yes China will grow, yes China will be a vital part of the global power structure. But while we all may well be driving Chinese cars in 20 years we won’t all be speaking Mandarin and doffing our caps to the Great Red Behemoth. China in 2010 = Japan in 1980…

  3. Graham Bell says:

    Interesting points, Paul.

    @4: The demographic timebomb …. and the “bachelor army” imbalance will be resolved soon enough …. though not necessarily to our advantage.

    @5: Hey, fair crack of the whip. The days of local (GuoChan) brands being despised are fast coming to an end …. and, naturally, any sub-standard stock left over will be dumped on the gullible end of the world market …. like Australia, those mugs will pay top dollar for anything they’re told is “cheap”.

  4. kEItHY says:

    If Australia can develop some decent renewable technologies then it could make a killing…………

  5. Chris says:

    kEItHY – not necessarily. I’d imagine that in most cases it would be cheaper for the Chinese to just manufacture it themselves. Was listening to a BBC podcast the other day – and apparently to operate in China many foreign companies are now being asked to handover IP they develop so the Chinese are able to do future projects themselves.

  6. Joe says:

    Chris, perhaps kEItHY just meant develop, in which case he may well be right. But even production is possible in Australia. German companies compete with Chinese companies in the solar panel business. Australia should definitely be investing in alternative energy technology and industry.

    What’s the point of investing in education, when there’s no industry for the educated work in?

  7. Chris says:

    Joe – yea I took kEitHY’s comment as saying we could make a tons of money selling renewable technology products into China. I think its far more likely that after some initial sales they would just copy and manufacture their own at much lower cost.

    There might be some room to develop and manufacture for our own needs – would probably need much bigger subsidies like in Germany to get the demand high enough though.

  8. MichaelP says:

    It’s not so much that China is changing, but that China is now changing the region and the world. Australian influence is being eclipsed by China in Fiji, in East Timor and in PNG, to name but a few places. Africa is something else. I’ve just been hosting some visitors form China and their verdict on Australia was ‘parochial, boring and backward’. Cities like Beijing and Shanghai have recently built huge new metro systems while Sydney has spent a decade dithering over whether to extend a light rail service by a few stops.
    China is not about to hit a wall as it reaches the limits of cheap labour. It’s going to go up a gear as the ‘smart labour’ starts to make US and Australian manufacturers look even more redundant.

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