Date posted: December 24, 2012
China today is a major economic power in the world, but what are the major issues China is facing today? N.C. State University economist Mike Walden responds.
“And, of course, many people in our country look at China as a competitor. Indeed, China’s come a long way. Their total output is grown tremendously. They’re still about half of what we are, but their growth rate is very high. And China has promoted manufacturing. They’ve promoted exports. They’ve promoted keeping the value of their currency very low. All of those things many in our country take exception to.
“But, again, I think to understand why China’s doing this, you have to go back into their background. And they face big challenges as you indicated. One is finding jobs for millions, tens of millions of people who each year move from rural areas to the cities. If they don’t find jobs for those people, that could create economic and political unrest. So, that I think is the main reason behind their emphasis on manufacturing and promoting their low-cost labor.
“Long run, they face a challenge over educating those new workers, improving their health, and oftentimes this is going to lead however to higher wages. And indeed it has. So China faces another challenge in staying competitive. Many companies, for example, have moved back to the U.S., or they’ve moved to other Asian countries in search of lower-cost labor.
“But perhaps China’s biggest challenge – and some may find this very, very ironic – is their one-child policy. That’s actually led to a likely peaking of their labor force in a few years, and then they’re going to see a big decline in their labor force. All the while their elderly component has been growing. That probably will be China’s biggest challenge.”
Category: Economic Perspective