A recent article in The Economist helps to put the China factory closure issue in perspective.
A longer-term concern is whether more expensive labour could wipe out Asia’s competitive edge. Labour costs are rising much faster than in the developed world, forcing some Chinese firms to close down. But Chinese manufacturing wages are still less than 10% of those in America.
More factories in southern China will go bust in 2009 because the country is starting to lose its competitiveness in some low-value products, such as toys, shoes and textiles. This is forcing Chinese manufacturers to move up the value chain, just as those in South Korea and Taiwan did years ago. But this is evidence of success as countries grow richer, not a sign of dwindling competitiveness.
This seems to indicate agreement with me that many press reports are exaggerating the the scope of China’s economic slowdown in general, and the effect of factory closures in particular.
