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The Middle Income Trap awaits China

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



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.

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

Obviously that is not the case.

Actually Korean does have a point.

There's a saying here "God created heaven and earth, everything else is made in China"

My televisions, handphones, videogames, computers and basically every electronic device I have are all "made in China", but all of them were manufactured by American or Japanese companies.

Once the cost of manufacturing products in China becomes pricey, all this companies will move to another country.

Won't that cost a lot of jobs lost for the China?
 
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Chinese GDP now is where South Korea was at early 1980s.
So that's a 30 year gap.

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.
This is a lie. Hong Kong residents intensely dislike mainlanders, and prefer to call themselves Hong Kongese instead of Chinese.

I see no reason why the mainland can't do the exact same thing we did
Hong Kong has a British legal system. China has no functional fair justice system.

which was to transfer from low-cost manufacturing into higher end products and services.
Hong Kong doesn't manufacture anything(Not anymore); its economy is based on finance and trade between the mainland and the rest of the world. Because so few people and foreigners make so much money, the GDP figure looks high even though the majority of population makes little money.

won't that cost a lot of jobs lost for the China?
400K jobs for the departure of Foxconn alone.

[/COLOR]Let's hope the shifting to higher end products do not conflict with Korean manufacturing of LCDs, cars etc.
Just ask Taiwanese companies how well their higher end products are selling overseas.

Chinese inability to create world-class brands and high-value goods is demonstrated in places like the Chinatown in the New York City. Here, Chinese businesses compete on price only. The prices in Chinatown are like 30~40% of the prices outside of Chinatown. A haircut that cost $15 + tips cost $6(No tip, although I do tip 50%). Single piece of bread that cost $1.5~2 at Japanese or Korean bakery cost $0.60 at Chinese bakeries. Japanese or Korean Fried Rice that cost $8 cost $4 at Chinese places. When I visit Chinese supermarkets, they cost 50% of what a similar Korean supermarket cost.

Then how come Chinese business hasn't taken over the world? Because $6 Chinese haircut isn't as good-looking as a $15 + 5 tip haircut at a Korean barbershop. Chinese bakery goods don't taste as good as Japanese bakery goods(Korean ones don't taste as good as Japanese bakery either, but these people manage to charge Japanese prices and get away with it). Chinese fried rice isn't as soft and moist as Japanese or Korean style fried rice. This is why Chinese businesses hasn't taken over the US in spite of their unbelievable prices, because the quality isn't there to justify their purchases in spite of low prices.

In fact, what's happening is that out of all the "Asian grocers" in the US, only Korean chains managed to go "mainstream" across the US. How? By attracting non-Korean shoppers, while Chinese supermarkets attract Chinese shoppers only, who are increasingly fleeing to Korean and Taiwanese stores because of uncleanness and bad customer service.
 
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So that's a 30 year gap.
And you still haven't answered my question, where was Samsung 30 years ago?

Chinese inability to create world-class brands and high-value goods is demonstrated in places like the Chinatown in the New York City. Here, Chinese businesses compete on price only. The prices in Chinatown are like 30~40% of the prices outside of Chinatown. A haircut that cost $15 + tips cost $6(No tip, although I do tip 50%). Single piece of bread that cost $1.5~2 at Japanese or Korean bakery cost $0.60 at Chinese bakeries. Japanese or Korean Fried Rice that cost $8 cost $4 at Chinese places. When I visit Chinese supermarkets, they cost 50% of what a similar Korean supermarket cost.

Then how come Chinese business hasn't taken over the world? Because $6 Chinese haircut isn't as good-looking as a $15 + 5 tip haircut at a Korean barbershop. Chinese bakery goods don't taste as good as Japanese bakery goods(Korean ones don't taste as good as Japanese bakery either, but these people manage to charge Japanese prices and get away with it). Chinese fried rice isn't as soft and moist as Japanese or Korean style fried rice. This is why Chinese businesses hasn't taken over the US in spite of their unbelievable prices, because the quality isn't there to justify their purchases in spite of low prices.

In fact, what's happening is that out of all the "Asian grocers" in the US, only Korean chains managed to go "mainstream" across the US. How? By attracting non-Korean shoppers, while Chinese supermarkets attract Chinese shoppers only, who are increasingly fleeing to Korean and Taiwanese stores because of uncleanness and bad customer service.

Guess that depends on where you are. Here in Canberra, Chinese (and Chinese-Malaysian) is the only Asian cuisine managed to break into the very top tier of the fine dining market. Whereas Japanese eateries despite their almost equal number didn't manage to go much beyond the quick sushi for lunch role. As for Korean, during this years multicultural festival I did enjoy some Korean food, mostly because it's the only one without people queuing up for half an hour.
 
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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?

WIPO points out China fits in efficency driven economy and moving towards innovation driven economy``again you stupid stereotype does your brain``

Kid``` cost isnt the major factor of determine wether a country can be a manufacturing base``along with skilled workers and infrastructures, a complete and competent supply chain is the most important one``

thats why most of hi-tech products (example; luxury cars, car engines, turbo engines, nano products, areospace materials and meg tone cargo ships`etc) are produced in western countries and China but not in other low cost countries you have listed`` and acutually China is No.1 exporter of hi-tech products out pace 2nd U.S by more than 30% margine``

one thing you need to worry about is S.korean losing edge to China as the labour cost in china is much lower than S.korea, and technology readness are almost the same, but China's industry is much more dependent than S.Korea which relies heavily on direct tech transfer from U.S and Europ```just by looking at your arsenal inventory you would get a clear picture
 
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So that's a 30 year gap.


This is a lie. Hong Kong residents intensely dislike mainlanders, and prefer to call themselves Hong Kongese instead of Chinese.
thats due to your sheer ignorance nothing els`

Hong Kong has a British legal system. China has no functional fair justice system.
wants to show-off your 'incredible' knowledge of British and Chinese judical system again genius ?!!

Hong Kong doesn't manufacture anything(Not anymore); its economy is based on finance and trade between the mainland and the rest of the world. Because so few people and foreigners make so much money, the GDP figure looks high even though the majority of population makes little money.
lol``if thats the case people of all western countries like U.S, U.K and France make little money`and S.korea makes the most```go no wonder some S.kreans claim Jesus is Korean``!


Just ask Taiwanese companies how well their higher end products are selling overseas.
just on top of my head HTC leads the tablets in European market``but your Samsung isnt doing very well

Chinese inability to create world-class brands and high-value goods is demonstrated in places like the Chinatown in the New York City. Here, Chinese businesses compete on price only. The prices in Chinatown are like 30~40% of the prices outside of Chinatown. A haircut that cost $15 + tips cost $6(No tip, although I do tip 50%). Single piece of bread that cost $1.5~2 at Japanese or Korean bakery cost $0.60 at Chinese bakeries. Japanese or Korean Fried Rice that cost $8 cost $4 at Chinese places. When I visit Chinese supermarkets, they cost 50% of what a similar Korean supermarket cost.

Then how come Chinese business hasn't taken over the world? Because $6 Chinese haircut isn't as good-looking as a $15 + 5 tip haircut at a Korean barbershop. Chinese bakery goods don't taste as good as Japanese bakery goods(Korean ones don't taste as good as Japanese bakery either, but these people manage to charge Japanese prices and get away with it). Chinese fried rice isn't as soft and moist as Japanese or Korean style fried rice. This is why Chinese businesses hasn't taken over the US in spite of their unbelievable prices, because the quality isn't there to justify their purchases in spite of low prices.

In fact, what's happening is that out of all the "Asian grocers" in the US, only Korean chains managed to go "mainstream" across the US. How? By attracting non-Korean shoppers, while Chinese supermarkets attract Chinese shoppers only, who are increasingly fleeing to Korean and Taiwanese stores because of uncleanness and bad customer service.

and you are trying to convince others to believe your stupidity by using hair-cut and grocery shops? lol```even its true have you been counting how many foreigners shop in Korean (chinese) grocery shops and how many in Chinese grocery shops?

with all the places I have been to Chinatowns are always located within the busiest district of any world class city, like the one in London, Manchester NewYork, Chicargo``etc``but once in awhile you'd find a small korean shop in the corner`lol```so in this case can I say S.korea has no class and insignificant?

kid next time you want to laugh at Chinese look at mirror first``to western people you all look Chinese``:no:
 
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This is a lie. Hong Kong residents intensely dislike mainlanders, and prefer to call themselves Hong Kongese instead of Chinese.

I am a Hong Konger myself, do you think you know more than me about my own city? :lol:

We always refer to ourselves as "中国人" (Chinese people). Check the demographics, 95% of the Hong Kong population is Han Chinese.

Even the Singaporeans, who are majority Chinese ethnicity, still refer to themselves as "华人".
 
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What doesn't play well for China or other big developing nations is supply (cost) of energy. SK/Japan/Taiwan are smaller nations and they developed in era of cheap gas. And then there is strain on other essentials like food/water...That is why I don't buy any future predictions. They all simply ignore things like energy, food, water, .... For example, PC energy consummation is so high in US (or west in general) compared to developing nations that for China to match that level, it will have to probably mine asteroid belts.
 
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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.
I thought S. Korea came close. Their "trap" broke, I think, due to the power of the unions compelling the chaebol to pay decent wages. (Did you know in the early 1980s it was possible to purchase huge hi-tech Korean-built cargo vessels and tankers for under $2 million? Nobody could beat that.)

It isn't always obvious to me how to gauge employment compensation in China; it isn't all about money. For example, in one article on Chinese manufacturing written in an American car magazine, the Chinese managers were compelled - terrified, really - into providing the highest-quality food available to their workers in the company cafeteria. If they did not, then the next day the workers would leave en masse to work in the factory across the street.

That sort of worker leverage applies during economic expansions. The true test of the system will occur during an economic recession. The Party has done everything it could to put that off for over twenty years.
 
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We'll see in a few years how things turns out.
You need not to wait a few years; just look at the history of HK and Taiwan to see the future of China. That's if China manages to get rid of the communist party and become democratic; if not, then the future is bleaker for China.

thats why most of hi-tech products (example; luxury cars, car engines, turbo engines, nano products, areospace materials and meg tone cargo ships`etc) are produced in western countries and China
Foreign brand luxury cars are built in China with imported parts to escape the 30% import tariff, they are not of Chinese engineering. The only thing the Chinese bring is the labor. I mean, you have BMW and Brilliance Zhonghua rolling down the same line at Brilliance's factory; BMW is a BMW, while Brilliance Zhongua is the second car that scored zero in EuroNCAP auto crash test.(The first one being Landwind of China). Pretty much the same story with everything else.

but not in other low cost countries you have listed`` and acutually China is No.1 exporter of hi-tech products out pace 2nd U.S by more than 30% margine``
Those are made by foreign corporations.

one thing you need to worry about is S.korean losing edge to China
And I was reading in November edition of Nikkei Trend how Japan Inc. has been defeated by Koreans. It's funny how your understanding of the world is exactly the opposite of the reality.

as the labour cost in china is much lower than S.korea
Irrelevant because Korean corporations learned how to cope with higher labor cost via efficiency. When you move up to high-value goods, labor cost becomes a small portion of your overall cost.

and technology readness are almost the same
You are not serious, are you?

some S.kreans claim Jesus is Korean``!
No, what's happening is that some cult leaders are claiming to be the reincarnation of Jesus. Those people are free to make such claims because Korea is a free country.

just on top of my head HTC leads the tablets in European market``but your Samsung isnt doing very well
Apple Info Center | iPad Still Dominates with 81% of Market

But Strategy Analytics said the iPad dominates every major region, particularly North America because its brand and distribution networks are best established here. Meanwhile, it said, "HTC's tablet strategy struggled to make an impact in Western Europe and elsewhere."
Once again, the reality is exactly the opposite of your little fantasy world.

and you are trying to convince others to believe your stupidity by using hair-cut and grocery shops? lol```even its true have you been counting how many foreigners shop in Korean (chinese) grocery shops and how many in Chinese grocery shops?

Well, just read.

Top 5 Grocery Store Openings of the Decade - Houston Restaurants and Dining - Eating Our Words

Super H Mart: Sure, other Asian-focused grocery stores existed before Korea-based chain Super H Mart opened in an old Kroger store on Blalock. Ko-Mart, just down the road, had filled the Korean grocery store niche for years, and countless grocery stores in Chinatown -- both old and new -- have offered Asian foods, ingredients and spices for decades. But when Super H Mart opened in 2008, it turned the Asian grocery store paradigm on its head. This wasn't a baffling, oddly scented, dimly lit store like our beloved Hong Kong Market. With a food court, a bakery, a phenomenal fish department, a wall of kimchi, a jewelry store, wide aisles, bright lighting and cheerful signage, it was a fascinating hybrid of American and Asian grocery stores. 99 Ranch Market, which opened this year in the old Fiesta Mart location also on Blalock, is another chain that's trying to emulate the Super H Mart model -- and by all accounts, it's succeeding so far.
The story is repeated across the US; tiny Chinatown supermarkets getting killed by Korean(Super H-mart, HanNam) and Taiwanese(99 Ranch) steamrolling everybody else.

Top 5 BGrocery Store opening of the decade in Houston, Texas.

H-E-B
Central Market
Mi Tienda
Super H Mart
Wal-mart

I am a Hong Konger myself, do you think you know more than me about my own city?

We always refer to ourselves as "中国人" (Chinese people). Check the demographics, 95% of the Hong Kong population is Han Chinese.
Sorry to prove you wrong.

BBC??? - ???? - ??14??????????

結果顯示,選擇「香港人」的為44%, 選擇「中國人」的為23%,「中國的香港人」和「香港的中國人」分別為21%和10%。
65% of people in Hong Kong identify themselves as Hong Kongese, not Chinese. Only the mainland immigrants like yourself all yourself Chinese.

the Chinese managers were compelled - terrified, really - into providing the highest-quality food available to their workers in the company cafeteria. If they did not, then the next day the workers would leave en masse to work in the factory across the street.
This is the secret sauce behind world-class corporations in Japan and Korea. Japanese and Korean corporations practice life-time employment and make heavy investment in training of those workers for a decade. This is only possible because the social norm discourages workers from moving between companies, and it is the heavy investment in human capital that turned these companies into world-class competitors.

On the other hand, there is no company loyalty among Chinese workers, who jump companies at the slightest offer of salary increase. Since Chinese corporations cannot trust their workers, they make no investment in their workers, and prefer to steal workers from other companies if necessary.

This is why the rise of Japanese/Korean style world-class corporation is impossible under Chinese culture. There were no world class corporations in Hong Kong and Taiwan, and there won't be in China.
 
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well i dare to say that even $10,000 per person is not bad for a country with a juggernaut population.

Besides i have a believe(and its my personal believe only) that when you get tooo much money you start making trouble for others.When you don't have anything to worry(or even bother) about your brain becomes idle and you start to creating trouble for others.

I have observed this for both individuals and nation states. Think about it.
 
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I believe China is much more better than your north compatriots. I just know that the Chinese people can use one stockings to exchange a north korean girl's virgin. so does this mean korean girls are cheap? BTW, pls dont deny n Korean are korean 2.
 
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