Research (Conseq)
Macroeconomics  |  January 28, 2013 15:08:23

China loses along with cheap labor force and position as the second largest economy in the world?

China's industrial production in December increased 10.3 percent year on year, confirming that the hard landing of China for the time being held. Industrial production is one of the main engines of China's economic growth. After all, accounts for nearly half of economic output Middle Kingdom.   China should also be an engine for global economic growth in the next few years. During this year, the economy should grow by eight percent, while Europe will face stagnation and the United States grow about two percent.

Of course with it economic growth carries a change to citizens. Workers demand higher wages and the central government is beginning to be a problem to import cheap labor from the east of the country. Chinese citizens are also critical to the ecological devastation caused by unsound production processes. Brake happens to legislation on minimum wages (past decade has increased the minimum wage to more than dvouapůlnásobek), ie a little faster than the overall economic growth. The government is seeking higher wages, increase consumption of households, whose share of total economic output is about half of the United States.

It is true that in Vietnam and Indonesia, wages are significantly lower.   On the other hand, there should investors expect significantly worse infrastructure. The average Vietnamese employee coming year in terms of less than 18 000, - CZK, ie, less than a fifth of the income of the average Chinese.

Production capacity to move, relate mainly unskilled jobs. In China remains a high-tech manufacturing. Indeed, production of computers, mobile phones and similar devices in December increased by more than 15 percent year on year.  



Vojtech Iron,

Portfolio Manager

Conseq Investment Management, Inc.






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