China is Losing Its Edge

For indispensable reporting on the coronavirus crisis, the election, and more, subscribe to the Mother Jones Daily newsletter.


This is one of the reasons that I’m a little less preoccupied by China than some people:

Rising Chinese labour costs are changing the economics of global manufacturing and could contribute to the creation of 3m jobs in the US by 2020, according to a study being released on Friday.

….The Boston Consulting Group estimates that the trend could cut the US’s merchandise trade deficit with the rest of the world, excluding oil, from $360bn in 2010 to about $260bn by the end of the decade. The shift would also reduce its soaring deficit with China, which reached $273bn in 2010 and has triggered an intense political controversy over China’s exchange rate policies.

This has been inevitable for a long time. As China grows and gets richer, its workers will get paid more and it will make less and less sense to move U.S. production there. It’s a natural brake on offshoring. Add to it China’s demographic trends and you have a country that still has a bright future but is almost certainly not going to be able to keep up the torrid growth rates of the past few decades. Once it hits per capita GDP of $10-15 thousand or so, continued progress is going to come ever more slowly.

At the same time, this isn’t automatically great news for American manufacturing, which, in the short term, is just likely to migrate to India and Malaysia and other countries with even lower labor costs than China. And as for our current account deficit, the key phrase in the article above is “excluding oil.” Obviously China is a significant factor in our trade deficit, but oil is both a bigger and more persistent one. If we want to tackle that — and we do! — we need both macroeconomic action (a weaker dollar) and policy action (ways to reduce our use of OPEC oil). Both a weaker dollar and a carbon tax are our friends right now.

Dear Reader,

This feels like the most important fundraising drive since I've been CEO of Mother Jones, with staggeringly high stakes and so much uncertainty. In "News Is Just Like Waste Management," I try to unpack the reality we all face and how we can rise to the challenge. If you're able to, this is a critical moment to support Mother Jones’ nonprofit journalism: We need to raise $400,000 to help cover the vital reporting projects we have planned, and right now is no time to pull back.

Monika Bauerlein, CEO, Mother Jones

Dear Reader,

This feels like the most important fundraising drive since I've been CEO of Mother Jones, with staggeringly high stakes and so much uncertainty. In "News Is Just Like Waste Management," I try to unpack the reality we all face and how we can rise to the challenge. If you're able to, this is a critical moment to support Mother Jones’ nonprofit journalism: We need to raise $400,000 to help cover the vital reporting projects we have planned, and right now is no time to pull back.

Monika Bauerlein, CEO, Mother Jones

We Recommend

Latest

Sign up for our free newsletter

Subscribe to the Mother Jones Daily to have our top stories delivered directly to your inbox.

Get our award-winning magazine

Save big on a full year of investigations, ideas, and insights.

Subscribe

Support our journalism

Help Mother Jones' reporters dig deep with a tax-deductible donation.

Donate