Virtually every western manufacturer that has facilities or suppliers in China has been drawn there by one overriding goal– to make things cheaper.
But how much longer can Low Cost China continue to gain height as a business model?
A new book, The End of Cheap China: Economic and Cultural Trends that will Disrupt the World analyses China’s rise as an economic powerhouse and asks searching questions about how much longer it can continue to promote itself as a low-cost workshop to the world.
China is changing, argues author Shaun Rein, founder of the China Market Research Group and regular reader of EngagingChina. The abundant supply of cheap labor that has made China the world’s supplier of everything from asparagus to iPhones is drying up.
As incomes rise and competition for workers increases, particularly in China’s cities, Chinese workers will be less inclined to work long hours for low pay, and more inclined to use their free time to consume goods and services.
China’s continuing transformation from producer to large-scale consumer is farther advanced than most economists think, Rein says, and it could pose big threats to the consumption-driven way of life that western consumers take for granted as west and east compete for limited resources.
Its an argument that we have made many times in EngagingChina and its great to see that Rein drawing on his extensive on-the-ground experience to lift the lid on China’s changing economy.