China's economy has been the focus of the global economy for a decade or more. Considered by some to be a force that could not be stopped, it may be facing some drastic changes as its customers for exported products have had their own share of economic problems... and the gradual rise in production costs have made it less desirable to establish factories for other countries.
For example, The Economist wrote:
“WHEN clients are considering opening another manufacturing plant in China, I’ve started to urge them to consider alternative locations,” says Hal Sirkin of the Boston Consulting Group (BCG). “Have they thought about Vietnam, say? Or maybe [they could] even try Made in USA?” When clients are American firms looking to build factories to serve American customers, Mr Sirkin is increasingly likely to suggest they stay at home, not for patriotic reasons but because the economics of globalisation are changing fast.
Labour arbitrage—taking advantage of lower wages abroad, especially in poor countries—has never been the only force pushing multinationals to locate offshore, but it has certainly played a big part. Now, however, as emerging economies boom, wages there are rising. Pay for factory workers in China, for example, soared by 69% between 2005 and 2010. So the gains from labour arbitrage are starting to shrink, in some cases to the point of irrelevance, according to a new study by BCG.
This may be a temporary adjustment or the return to reality for China.
An article at Al Fin concludes:
This is not a China collapse, but rather a foretaste of what happens when there is a suggestion of an eventual auditing of the books. When the books are actually audited, even more significant adjustments will be made. But even later, in the aftermath of the auditing, there will be a reckoning.Read the whole article.