China has an edge over the rest of the First World in terms of trade for one, very good, single reason that no-one disputes - the fact it currently has low wages. That advantage will not be perpetual but, in a single party state, it will last for a long time as the state controls wages, albeit with regional variations.
However, when you think about it, that advantage is limited solely to areas of the economy that are dependent on people. Remove the human element from the equation and there is no advantage and, in fact, the transport cost of finished, manufactured good becomes the dominant differential cost, which is to the disadvantage of any remote production facility, such as those in China - not to mention the effect of that transport on climate.
This will stimulate Western companies to level the playing field by repatriating manufacturing and replacing people in the manufacturing process with robots to negate the wage differential.
In response, it will become incumbent on China to respond by investing in production facilities nearer to its markets by direct investment, but without using expensive, local people in those markets. That also is achieved by fully automating manufacturing processes and replacing people with robots.
It costs the same to run robots in the West as it does in China. However, the use of robots to manufacture goods does not bode well for the employment prospects of people, either in China or the West. That means fewer people employed worldwide, which also means fewer buyers of the manufactured goods.
That's the conundrum that faces us in the future. Analyse and discuss.
No comments:
Post a Comment