China Is No Longer A
Low-Cost Producer
China's explosive economic growth has largely been driven by its
booming exports. And its exports have been driven by its low cost
of production.
However, with its working age population shrinking, wages have
been on the rise. And global manufacturers have increasingly
moved toward even lower cost countries.
"China is no longer a low-cost producer," writes KKR's Henry
McVey.
"Importantly, we think rising wages, particularly at the low end,
are a structural phenomenon as the population of younger workers
aged 15-29 will shrink at an average pace of five million a year
between now and 2030, largely due to the one-child policy
implemented in 1979. By comparison, this age bracket had actually
been growing by two to three million per year annually until
recently."
Here's a chart from McVey's report showing wage trends in Asia's
lowest cost countries:
Monday, April 15, 2013
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