Unwinding China growth "reshores" focus back to US
Shift has implications for developing countries that have enjoyed a decade of strong growth
CHINA was (again) a main economic feature of 2014 and will likely continue to be so this year, but perhaps under headlines some would deem less than satisfactory. The decades-long investment boom resulting from its urbanisation and industrialisation since the 1980s has started to subside. This, coupled with a shrinking labour force, a long-term impact of the one- child policy; declining productivity growth following the peak, resulting from moving farmers into factories; and soaring wages because of fewer underemployed workers being available for hire, among other factors, has seen economic growth in the world's second largest economy start to slow.
The effects will be felt far beyond China's borders. Emerging markets across South America, Africa and Asia may experience slower growth as demand slows for the commodities and raw materials China needed for industrialisation. Also, while the Sino-American economic relationship has described China as the "manufacturer" and the US the "buyer" over the past 25 years, things are changing.
China's exports have become less competitive, owing to a four- to five-fold increase in wages and appreciation of the renminbi, as well as its new economic model. This is a model that now relies less on exports and more on domestic consumption and its citizens' increasing demand for high-quality consumer goods and services that has grown as the standard of living has continued to improve.
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