China – The Consumer Nation

February marked the first time since China started exporting manufactured goods that China has experienced a trade deficit. China has crossed the threshold from being a producer nation to being a consumer nation, and there is no turning back.

The westernization of China is nearing completion. We, the United States, started in the late 1950’s taking advantage of the low worker wages in China, and we have continued for almost 60 years. But China has changed over the years. The people of China started liking and wanting the products they manufactured. They demanded higher wages to afford the niceties. Then Hong Kong was returned to China control, and the inhabitance of Hong Kong would not surrender their western freedoms. These western ideals spread to Beijing and other large cities. China now has an emerging middle class. The emergence of the middle class will cause wages to increase even more, to the point that most countries will find it no longer practical to import goods from China. Then the westernization of China will be complete. Then what country will the world exploit to get its goods produced cheaply? Who will be the next China?

The answer is not simple or safe. India is out, they are the World’s out source for customer service not manufacturing. South America is already well on its way to modernization. That leaves the poor countries of the Middle East, and the unstable countries of Central and Western Africa. However the Middle Eastern countries hold many problems with the restrictions on the products they will produce due to their religious beliefs. While the corrupt and unstable governments of the African nations hold many safety, and investment loss issues to deal with. In short there is no good option at present to replace China as the world export mecca.

Replacing China is not a pressing issue today in the headlines, but I assure you that thousands of companies producing products in China today are already hunting a new location for their product. These companies have read the signs of the coming need to relocate, and they do not want to be a product without a cheap country to exploit.


Gerald