27 Feb 2011 1 min read

"China’s Turning Point"

http://www.project-syndicate.org/commentary/roach2/English

Let me be clear that I am do not have the deep enough understanding of the historical, economic, social and politcal influences that shape China needed to offer a reliable analysis of the latest 5 year plan which, incedentally, will see China "moving from the export- and investment-led structure of the past 30 years toward a pattern of growth that is driven increasingly by Chinese consumers". In the past Beijings' (some would falsely claim draconian) protectionist approach to crucial market areas (characterized by strict FDI conditions, 51% local content requirements, casual disregard of patent laws) along with considerable social cohesion, governance and natural reasources allowed for rapid industrialization and economic expansion based upon satisfaction of consumer demand in other nations. Up to a point this export driven growth is benificial but as the 2007 financial crysis served to show it made china increasingly dependant upon (and vulnerable to) the policies and economic directions of other nations.

The effects of chinas internalization will be twofold. Domestically there will be a rise in wages and living standards within china and, as the more decentralized, more labour intensive services industry developes, there should be a gradual fall in inequality between rural and urban areas (although this rise in equality may not

necassarilly be measured in terms of wages but living conditions^[1] ) and the emergence of a middle class should accelerate which, while bringing great long term advantages, could well pose a problem if the current system is unable to satisfy their needs. Externally a lessend dependence on exports(and thus access to external markets) would put China in a stratigically stronger position as any move to by other powers (most likely the west and US in particular) to limit Chinese access to the numerous markets they hold sway over would no longer have as disasterous an effect which should be a contributing factor (along with continous growth in GDP and thus millatary spending and US overexpansion) of the increasingly bold direction Beijings forign policy is set to take.

27th Febuary, 2011

1. wage parity fails to take into account differing costs of living (e.g food ,transport ,housing )

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