The Middle Income Trap awaits China

[Korean]

Economist: China should be vigilant of ?middle income trap? - People's Daily Online

WB chief warns China of 'middle income trap'

WASHINGTON - China's economic growth has been a source of strength in the crisis, but the nation also needs structural changes to stave off a "middle income trap", World Bank President Robert Zoellick said Thursday.

The middle income trap is the inability of a middle-income($4,000~10,000) country to transition to high-income($10,000 and up), due to lack of innovations and value-creation needed to support high-wages.

Current Chinese growth is fueled by low-wages, and China's export competitiveness deteriorates rapidly as wages rise, triggering foreign corporations to relocate to other low-cost countries like Vietnam.

Unlike Japan and Korea, China has no world-class brands of its own to substitute foreign manufacturers leaving China, and this will slow down China's wage growth as China's income approaches $10,000. At certain point, China's economic growth stalls and China is caught up in what's known as the middle income trap, being stuck in the middle income status due to Chinese business's inability to create value via innovation, creativity, and quality needed to support higher wages for workers.

So Chinese economy will continue to grow for another 5~7 years but will be running out of fuel(low wages) around the GDP per capita of $9,000.

 

[Korean]

The United States will be competitive with China in Manufacturing costs in 2015

The United States will be competitive with China in Manufacturing costs in 2015

Within the next five years, the United States is expected to experience a manufacturing renaissance as the wage gap with China shrinks and certain U.S. states become some of the cheapest locations for manufacturing in the developed world, according to a new analysis by The Boston Consulting Group (BCG).

With Chinese wages rising at about 17 percent per year and the value of the yuan continuing to increase, the gap between U.S. and Chinese wages is narrowing rapidly. Meanwhile, flexible work rules and a host of government incentives are making many states—including Mississippi, South Carolina, and Alabama—increasingly competitive as low-cost bases for supplying the U.S. market.

 

[Chinese-Dragon]

If low wages = manufacturing giant, then Africa would be the #1 manufacturer in the world.

Obviously that is not the case.

 

[Korean]

If low wages = manufacturing giant, then Africa would be the #1 manufacturer in the world.
Obviously that is not the case.

Manufacturing cost = absolute wage / efficiency. China is a low efficiency country, so a $3 wage in China buys you as much work done as $9 wage in the US does.

Will most of these jobs return to the US when some parts of the US reaches manufacturing cost parity with China? Some will, others not. But those non-returning jobs will leave China to go to Vietnam, Cambodia, Laos, Sri Lanka, etc.

What will become of China's migrant workers after foreign export factories leave China? Will there be Chinese corporations to absorb these laid-off workers and pay them $5/hr(32 yuan) in wages?

 

[Chinese-Dragon]

Will most of these jobs return to the US when some parts of the US reaches manufacturing cost parity with China?

If the USA will soon be able to compete with Chinese manufacturing, in terms of cost... then I assume we won't hear any more whining about America's trade deficit, which is currently #1 in the world by a significant margin. And which fuels the #1 largest debt in the world ($14 trillion dollars).

Fair enough?

But those non-returning jobs will leave China to go to Vietnam, Cambodia, Laos, Sri Lanka, etc.

Probably correct. China's job now, is to move up the value chain, and to increase domestic spending. We have more than 1.3 billion consumers here, all we need to do is properly harness it.

 

[Chinese-Dragon]

The "middle-income trap", has historically occurred in places like Latin America.

There is not one single East Asian country, that has fallen in to the middle-income trap.

Though of course it is a risk that the CPC can't afford to ignore.

Everyone was concerned a while back, about a "property collapse" in China. These dire predictions are actually very beneficial for us, since it galvanises the Chinese government into taking corrective measures sooner rather than later.

 

[Fantasy]

South Korea rocket 'explodes' moments after take-off

Communication was lost just two minutes after the KSLV-1 took off
A South Korean rocket appears to have exploded moments after take-off, ending the country's latest attempt to join the space-launch industry.

The Korea Space Launch Vehicle 1 is thought to have blown up 137 seconds after take-off, said science minister *** Byong-man.

The rocket lifted off from Goheung's Naro Space Centre at 1701 (0801 GMT).

But contact was lost as the rocket reached an altitude of 70 kilometres (44 miles).

"Looking from the bright flash seen on the camera mounted on the tip of the rocket, it appears [the KSLV-1] exploded in flight during the first-stage ignition," said Mr ***.

Pictures on South Korean television appear to show the rocket's final moments, with the cameras following a white speck on its downward trajectory into the sea.

Analysts say the reported failure is a major setback for South Korea in what some observers have described as an "Asian space race".

Malfunction
The launch was South Korea's second attempt to put a satellite in space, after a launch in August 2009 failed.

The country had been hoping to become only the 10th in the world able to put satellites into space, and thereby gain a lucrative slice of the growing space launch industry.

Continue reading the main story
Analysis



John Sudworth
BBC News, Seoul
This was South Korea's second attempt after the first, in August last year, also failed to place a satellite into orbit.

There were high expectations. The launch was carried live on major news networks, and crowds of people on beaches along the south coast whooped and danced as the rocket lifted off from the nearby launch base.

But failure is commonplace for any nation trying to develop a new rocket; some estimates put it as high as 50%.

South Korea had spent $400m on what was always known to be a high-risk mission to become one of only a handful of countries with an independent satellite launch capability.

So far it has come to nothing.

China, India and Japan have developed a launch capability; China has also sent three manned missions into space.

The KSLV-1, built partly in Russia and partly in South Korea, had cost 500 billion won ($400m; £275m).

The satellite - which had been intended to study the effects of climate change - should have separated from the rocket and deployed its solar panels some nine minutes after take-off, at an altitude of 302km.

The rocket had been due to take off on Wednesday, but lift-off was cancelled three hours before launch after fire extinguishing fluids were detected leaking from parts of the equipment.

South Korea's Ministry for Education, Science and Technology said thorough checks had confirmed the leaks did not affect the safety of the rocket and the launch had been rescheduled.

Weather conditions had been closely checked in the final hours before the latest launch. A spokesman for the Korea Aerospace Research Institute (Kari) said all faulty hardware had been replaced and steps taken to prevent a repeat of the earlier faults.

The rocket stood 33m (108ft) tall and was launched from the country's new spaceport on the southern tip of the Korean peninsula.

South Korea's first launch of the two-stage KSLV-1, in August last year, failed to place its satellite payload into the proper orbit.

Four months previously, an attempted space launch by North Korea was deemed to have failed when the US reported that both rocket stages had fallen into the Pacific Ocean.

The North's launch was seen as a cover for a long-range missile test, and prompted UN sanctions.

Pyongyang had voiced irritation at the South's rocket development, but most other powers in the region accepted that its attempt was part of a peaceful civilian programme.

More on This Story

 

[Chinese-Dragon]

^^^ Wrong thread.

You need to start another thread if you want to discuss another topic.

 

[Roybot]

Why does this make you happy

 

[Fantasy]

^^^ Wrong thread.

You need to start another thread if you want to discuss another topic.

I also have another thread that is South Korea a plastic surgery heartland that analyses the phenomena and reason behind this trend, and Korea a history revisionist heartland, not sure i want to make a new thread for them.

 

[Korean]

If the USA will soon be able to compete with Chinese manufacturing, in terms of cost... then I assume we won't hear any more whining about America's trade deficit

Probably not. US politicians used to ***** about the trade deficit against Japan in the 80s and the 90s, but they don't complain about Japan anymore.

China's job now, is to move up the value chain

Taiwan tried that and failed.

and to increase domestic spending. We have more than 1.3 billion consumers here, all we need to do is properly harness it.

Most of Chinese consumers don't make enough to substitute export losses. For example, a line worker at Hyundai Motors's Korean factory will earn enough to buy 4 cars that he's building with his salary($80,000/year average this year). A line worker at a Chinese automaker, say Chery or Geely, will have to save up every single yuan of his salary for four years to buy that 100,000 yuan cheap car he's building. A massive difference in spending power here.

So Chinese look at Taiwan as future self, the once aspiring country that failed to move up the value ladder and makes $2 assembling iPhones instead.

The "middle-income trap", has historically occurred in places like Latin America.

There is not one single East Asian country, that has fallen in to the middle-income trap.

It happened to Philippines, and to a lessor degree Taiwan. Taiwan's worker wage is rather low(Significantly below GDP per capita), and this is the reason why many Taiwanese people prefer to go into business for himself instead of working for others.

I also have another thread that is South Korea a plastic surgery heartland

Yes, this is true. Rich Chinese women spend $100,000 to be made to look like Korean actresses. Korean plastic surgery industry would have collapsed if it wasn't for free-spending Chinese clients who make up like 40%.

Thanks to the false rumor circulating in China that all Korean female entertainers are surgically made up, the Korean plastic surgery industry has profited immensely.

 

[Nomenclature]

Unlike Japan and Korea, China has no world-class brands of its own to substitute foreign manufacturers leaving China, and this will slow down China's wage growth as China's income approaches $10,000.

Chinese GDP now is where South Korea was at early 1980s. Ask around and see if any American knew Samsung or LG 30 years ago.

 

[Chinese-Dragon]

It happened to Philippines, and to a lessor degree Taiwan. Taiwan's worker wage is rather low(Significantly below GDP per capita), and this is the reason why many Taiwanese people prefer to go into business for himself instead of working for others.

Since when was the Philippines an East Asian country?

I frequently travel into the Chinese mainland, and when I do, it looks to me like a much bigger version of my own Hong Kong.

Hong Kong has a nominal GDP per capita of $31,500... far more than South Korea. I see no reason why the mainland can't do the exact same thing we did, which was to transfer from low-cost manufacturing into higher end products and services.

 

[Fantasy]

Probably not. US politicians used to ***** about the trade deficit against Japan in the 80s and the 90s, but they don't complain about Japan anymore.


Taiwan tried that and failed.


Most of Chinese consumers don't make enough to substitute export losses. For example, a line worker at Hyundai Motors's Korean factory will earn enough to buy 4 cars that he's building with his salary($80,000/year average this year). A line worker at a Chinese automaker, say Chery or Geely, will have to save up every single yuan of his salary for four years to buy that 100,000 yuan cheap car he's building. A massive difference in spending power here.

So Chinese look at Taiwan as future self, the once aspiring country that failed to move up the value ladder and makes $2 assembling iPhones instead.


It happened to Philippines, and to a lessor degree Taiwan. Taiwan's worker wage is rather low(Significantly below GDP per capita), and this is the reason why many Taiwanese people prefer to go into business for himself instead of working for others.


Yes, this is true. Rich Chinese women spend $100,000 to be made to look like Korean actresses. Korean plastic surgery industry would have collapsed if it wasn't for free-spending Chinese clients who make up like 40%.

Thanks to the false rumor circulating in China that all Korean female entertainers are surgically made up, the Korean plastic surgery industry has profited immensely.

Which is also why Korean are know history revisionist, they lie out of their teeth, there is little Chinese surgery tourism in Korea, most of them are Japanese surgical tourism, and even then they are dwarfed by Korean women, and even men by at least 10-1 ratio, i don't call that saving industry, Koreans are the king at it, the rate per capita of South Koreans is even far higher than the USA, it is amazing.

 

[Fantasy]

China is in the process of shifting their economy to higher end product as well as increasing consumerism to become the import hub of the world as well.

---------- Post added at 08:32 AM ---------- Previous post was at 08:31 AM ----------

Let's hope the shifting to higher end products do not conflict with Korean manufacturing of LCDs, cars etc.