Is China Headed For An Economic Crash?

I had a great discussion with a German man on the train yesterday, and thought you might find it interesting. He is in the garment manufacturing business and works for a large German chain similar to The GAP or H&M, and has been in China for 3 years.

In our conversation we talked about a variety of topics: Manufacturing, GDP growth, High speed rail, the housing boom, China’s environment, and in each topic he brought up that it wasn’t sustainable.

Perhaps it was made more apparent by traveling 300km/hour through what used to be China’s countryside, which now offers little other than new apartment buildings, gray skies, and a dozen coal power plants.

One of the most interesting things he said was that wages have gone up enough now that China was becoming less attractive for garment manufacturers, with almost all of the factories moving away from China’s wealthy East coast. He said wages in China are about $150-$200 a month, but in Bangladesh its only $50. The bigger part though were the tariffs being put on imported clothes from China, which he said were around 10% in Europe. He said that he still thinks garments will be made here for another 5-10 years, but companies are starting to look elsewhere.

He also mentioned that for health reasons he would refuse to stay in China more than 2 more years. He has a 10 year old daughter, and was quite concerned about what China’s air would mean for her long term health. However he did say that since the World Expo, it seemed that Shanghai’s air has improved somewhat. He said several times that it was better than it had been in the past.

Lately it seems that I’ve been having more conversations like this one with foreigners who have been in China more than a few years. They will bring up the China’s massive growth, but they no longer seem to be as impressed by it.

At the moment it seems like China is a bus headed for a cliff, and economists from outside China and within are saying, “Hit the brakes! We’re going to crash!” and the government’s response is to slow down from 80 to 75.

This article seems to be the perfect compliment to this conversation, so I hope you will take the time to read it. It raises a number of questions about the sustainability of China’s rapid growth, and the uneven distribution of wealth.

Note: This is not to say that I want China’s economy to falter. I work in development, and I would love nothing more than to see China continue to pull millions out of poverty. That is why I think it is important to highlight these issues, so the gov’t will address these issues instead of ignoring they exist.

3 responses to “Is China Headed For An Economic Crash?”

  1. Today I am feeling really positive, allow me.
    Yes, China’s growth is no longer surprising, and it is lately a big concern. I agree. Such a potential powerful, big country, if does not act carefully, could be dangerous somehow. But, under my simplistic , young and unexperienced point of view, I think that the same way that China has learnt to grow, to “exploit” economically, it will also learn how to do it sustainably. That’s my hope.
    Thank you for the information.

    • Tom says:

      I hope so to. This post wasn’t helped by my two hour subway ride or the internet blocking ALL foreign websites while loading People’s Daily instantly.

  2. […] And their blog does cover a variety of topics relating to the Chinese man, his past, present and future. […]

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