Ready or Not, Here Comes the Post-China World

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Ready or Not, Here Comes the Post-China World

From 1979 to 2009, China enjoyed a singular “economic miracle.” The fundamental explosiveness of Chinese growth was not dissimilar to that seen in many other countries at the same stage of development.

Nevertheless, it was unique because of its sheer magnitude, as well as its longevity. However, for many reasons rooted in demography and economics, that era of break-neck economic growth—based on exports, cheap labor, and infrastructure projects—is over. And we’re entering what George Friedman of calls the Post-China World.1

Friedman, like the Trends editors, has been tracking this evolution for over two decades. However, we’ve only recently been joined by pop-culture pundits, like Paul Krugman, the New York Times columnist, who wrote in July 2013: “The signs are now unmistakable: China is in big trouble. We’re not talking about some minor setback along the way, but something more fundamental. The country’s whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be.”2

Obviously, China will continue to exist and perhaps prosper, but China’s place in the world will be filled by other nations with even lower wages and other advantages. For China to become the kind of country it must be to compete at the next level, it will be forced to behave differently from the way it has until now.

As Friedman reminds us, “Since the Industrial Revolution, there have always been countries where comparative advantage in international trade has been rooted in low wages and a large workforce. If these countries can capitalize on their advantages, they can transform themselves dramatically. These transformations, in turn, reorganize global power structures. After World War II, Germany and Japan climbed out of their wreckage by using their skilled, low-wage labor to not only rebuild their economy but to become great exporting powers.”3

In the 1950s, “Made in Japan” meant cheap, shoddy goods but, by 1990, Japan had reached a point where its economic power did not rest on entry-level goods powered by low wages, but on superior products powered by advanced technology. It had to move away from high growth to a different set of behaviors. Today, China is confronted with the same sort of transition.

For the most part, China’s growth surge was built on labor costs that were far below Western wages...

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