The graying of the Chinese economy
The Chinese economy, once the wunderkind economy of the world is now showing signs of fatigue. At one point, it was growing at doubledigit figures for about three decades or so but since 2016, it has slowed down to high single-digit growth that classifies it as just one of the high growth Asian economies. What has transpired?
To start with, the cost advantage of Chinese manufacturing has been whittled down. Cheap, plentiful, Chinese labor has now been replaced by Chinese yuppies and demands for better wages has been the norm or else factories lose employees.
The lack of more skilled labor has been exacerbated by the decades of the one-child policy where the population suffered negative growth of indigenous Chinese. The one child policy will soon create a gap where middle management will soon be largely of foreign origin. To fill its demand for skilled labor, the Chinese economy will have to rely in the near future on imported labor, of which the Philippines will be a beneficiary. As it is now, in the hotel and hospitality industries, Filipinos are the choice of employers due to their natural warmth and hospitality.
On top of this, the global economy is slowing down and demand for Chinese goods is affected by the global slowdown. The trademark of Chinese exports is generally in cheap consumer goods, as for heavy industrial machinery, Chinese quality and durability is still widely suspect. Several years ago, some local airlines tried Chinese made aircraft, whose principal attraction was their price. These were quickly abandoned when design, parts and service were generally found to
be of poor quality and the airlines that chose Chinese aircraft are quietly retiring them after just a few years of service.
Another example is that of the Chinese food industry. After the poisoned milk scandal and that of various food items made of suspect materials, the Chinese food industry has never quite recovered from its previous popularity, and once-popular brands like Ma Ling are now slow-moving items.
The Chinese economy was an export-driven economy and the slowing down of demand for Chinese exports can have other reasons as well. One of the accusations of foreign brands that rushed to China to serve the Chinese market was that there has been rampant theft of trade secrets and intellectual property rights. As a consequence, there have been several pullouts from China and this is growing as local brands have been competing with foreign brands manufactured in China. Exports of Chinese automotive products, for example often tout that these are made from European or American technology. The experience, however, with Chinese automotive products, especially here in the Philippines, is that resale values plummet precipitously after just a few months of use.
There are also geopolitical reasons for the slowdown of Chinese exports. Experts now generally concede that a wealthy China is a threat rather than a boon to global peace, as evidenced by their aggressive moves in the West Philippine Sea and other areas. As a consequence, and in realization of the growing affluence of China, trade agreements now are more centered on inviting Chinese capital to invest in other countries rather than for foreign investments to flow into China. There is a general cautionary flag raised on investments flowing into China on grounds of trademark and patent infringement, unfair trade practices and threats to personal security as a consequence of the lingering effects of a police state, no matter if covered up by wealth and affluence.
Even in the economic arena, there have been reports that Chinese ventures are intelligence tools of the State, such as that which happened in Poland. Chinese 5G equipment, for example is being restricted from operating in the United States, Australia, the UK and other EU countries on allegations of being intelligence gathering tools.
Events such as these, in addition to global economic slowdown, diminishing cost advantage and others are all contributory factors to slowing down of the Chinese economic growth and these will also lead to a coming crisis triggered by a looming crash of the Chinese real estate bubble.