What happens when, inevitably, Chinas costs rise as living standards go up?
China has to go upmarket. Already the higher-cost regions of China, most notably Shanghai, are moving out of mass-manufacturing and into more complex manufacturing and high-added-value services. But for another couple of decades there will be a plentiful supply of labour as people move away from less-developed regions towards big cities, so it will be able to contain costs for some years yet. It is investing heavily in training. What economic power does China have over other countries? China’s power shows up in three main ways: as a purchaser, mostly of raw materials; as a supplier to the rest of the world; and as an investor of its spare cash. In relation to the first, it has had a huge impact on Africa. It funds more infrastructure in Africa than all the aid of Western nations put together, much in exchange for raw materials. As supplier to the world, it has helped hold down living costs elsewhere by producing so many cheap goods. For example, it produces two-thirds of the world’s so
