China is the new America?

When checking the blogosphere I found this blog that describes China’s move to become an urban nation at breakneck speed. While I knew that this was happening, it made me think about the effects that such a transition will have.

China is currently a nation based on exports, when most of the Chinese move into cities I believe they will go from a nation of exports to a nation who imports what they need because when people move into cities their consumption will go up. As China gets rid of its farmland and natural resources they will not be able to provide enough supplies to their cities and in turn they will have to import these supplies from other countries.

This sounds much like America’s transition from a country who used most of its natural resources to a country who imports more then it exports. America’s trade deficit is simply stunning and I wonder if China goes down the same path and creates  trade deficit for itself, what country will capitalize on the opportunity. Will it be developing countries who have relaxed labor laws that can be exploited? will it be from USA who realizes that this would be a great way to create jobs and possibly help get rid of our debt?

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2 Responses to China is the new America?

  1. jwhite17 says:

    There are a few things going against this transition for China. Firstly, they are historically a nation of savers. The people’s congress has outlined increasing consumption as one of its main goals in its last two five year plans, with little to no results to show for it. This is largely because they still have far less social programs, so the saving is necessary. Also, the reason for the urbanization is that is where the manufacturing jobs are. China’s competitive advantage is cheap labor. As long as this is the case they will not be able to move up the value chain. This means that America will still be the leader in service jobs, which I feel is a position that we will have for some time to come. Unless China fixes this problem and increases the education of its people it will face large problems in the future due to its population structure. This is the result of the one child per family policy. They are also facing political unrest due to the rising income gap between urban/coastal and rural/inland areas. In the end they have many problems they have to solve or else they could face an unstable political system, which will stymie growth.

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