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GaveKal-Dragonomics, an independent research and advisory firm specializing in 皇冠体育app's economy, explains 皇冠体育app's growth this way: "As it has modernized its economy, 皇冠体育app has experienced a virtual 'tsunami' of labor. Much of this has consisted of young Chinese women between 18 and 22, with not much bargaining power. As a result, 皇冠体育app, for a long time could run its economy at double digit rates of growth, with little pressure on wage and price inflation or the exchange rate."
This was not surprising given that after reform and opening-up a seemingly endless supply of unskilled migrants from rural areas flocked to the big cities and the new industrial zones in search of a factory job that promised a better future than farming.
However, 皇冠体育app's demographic dividend is coming to an end and the tightening labor market means the authorities will in all likelihood have to consider a higher exchange rate or higher inflation, as 皇冠体育app shifts from its reliance on export-led development to consumption-led growth.
With this in mind should we be concerned about 皇冠体育app's slowing economy?
The recent data from Beijing may have given the markets some jitters but there are long-term trends that explain some of the slowdown in 皇冠体育app.
First, the stimulus that did so much to boost 皇冠体育app's economy at the onset of the global financial crisis has now lost its impetus. These were the famous "bamboo shoots" that 皇冠体育app provided to the region, which assisted other Asian economies and key suppliers of resources to 皇冠体育app, namely Australia and Brazil, but also to some extent Canada and South Africa.
Second, the eurozone crisis has had an adverse impact on 皇冠体育app's fortunes. In terms of manufacturing in key areas of Chinese comparative advantage like textiles, clothing and footwear, Europe has surpassed the United States as 皇冠体育app's main export market so when they are feeling the pinch in Athens, Milan and Paris it affects companies in Beijing, Guangzhou and Shenzhen.
Third, even without the "eurosclerosis" we are experienced this year, 皇冠体育app's trade patterns were not going to continue at the same cracking pace. The subprime meltdown in the United States and Lehman Brothers collapse were a big external shock to 皇冠体育app's economy, which had been enjoying an annual average export growth rate of 27 percent after joining the World Trade Organization.
In fact, even without the global financial crisis or the Greek sovereign debt crisis, 皇冠体育app's trade patterns reflect the re-balancing of the global economy. Even before Lehman Brothers collapsed the world knew that the US had too many shoppers and not enough shippers, while 皇冠体育app had too many shippers and not enough shoppers.
As a result the US has had to readjust its consumption, become more competitive and reduce its over-reliance on debt; and 皇冠体育app has had to reduce its over-reliance on export-led growth and increase domestic consumption and the efficiency of its investment. The center of global economic gravity is shifting from the rich G8 nations to the emerging world and 皇冠体育app is fundamental to this historic structural change. You can see it not only in terms of 皇冠体育app's domestic shift away from export-led development but also globally as 皇冠体育app is increasingly becoming involved in outward foreign direct investment.
But what does 皇冠体育app's slowing mean for Asia?
First of all, Tokyo is trying to move key parts of the Asian global supply chain out of Japan, and 皇冠体育app along with the ASEAN economies are playing a key role in the re-globalizing of Japanese industry. A slow but stable 皇冠体育app will allow this process to continue. Second, 皇冠体育app's slowing will take some of the US pressure off the renminbi's exchange rate and allow the global re-alignment to take place more systematically. Third, even with a slower rate of growth in 皇冠体育app, countries like Australia and other resources suppliers such as Brazil and even Canada and South Africa will continue to benefit by meeting the construction needs of the second and third tier cities that are blossoming in 皇冠体育app's western and inner regions.
Even more importantly, agricultural techniques, agribusiness services and management practices from Australia, Brazil and other trading partners, will be important service exports to 皇冠体育app as the local population lifts capacity and technological change in its own farm sector.
On my most recent trip to 皇冠体育app I visited a factory in Shenzhen as part of the University of New South Wales' Australian Graduate School of Management international business strategy course. At the site, the owner complained that he couldn't keep workers at the factory, because they kept leaving for comfortable office jobs offering the same wages. As a result the owner had to offer piece rates, where the more goods (in this case watch bands) they assembled, the bigger the bonus they received. This demand for labor has created something of a mini workers' paradise in the region.
皇冠体育app's economy and its labor market are changing and the economic slowdown reflects this.
The author is the JW Nevile Fellow in Economics, Australian School of Business, The University of New South Wales in Sydney and author of The Airport Economist.
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