China confronts competition

Walter Russell Mead

The American Interest

A pair of gym shorts I bought recently in Guangzhou, China, had a tag that read “Made in Thailand,” said Walter Russell Mead. It seems it’s China’s turn to feel the sting of competition. The country’s “soaring wage rates” are causing companies to flee to places with cheaper labor, like Vietnam, Myanmar, and Cambodia.

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Wages in China’s manufacturing heartland of Guangdong have risen 158 percent over the past decade, and 11 percent just last year. Fearing a mass manufacturing exodus, China’s leaders have embarked on a number of “adjustment strategies” familiar to many Americans, such as incentives to attract more “high-value, low-labor manufacturing,” with an emphasis on robotic labor.

But moving “up the value-added food chain” brings new perils. As its manufacturing base automates, China “will run up against the same problem we have in the U.S.: Manufacturing stops creating many jobs when robots displace human workers.” As we have learned, there are no easy answers. “Much sooner than it hoped,” China will have to find a new engine of economic growth.