China must find new strengths

Translated from 21st Century Business Herald

Recently released data showed that China’s trade growth slowed down remarkably in July.

The slowdown should not only be attributed to weakening demand from Europe and the US.

A country’s trade surplus is, by its nature, from lending and exporting its savings ratio to foreign countries. As China’s society is aging fast and its birth rate is declining, it will be increasingly difficult for the country to maintain its high savings ratio and trade surplus.

Another reason is that rising labor costs increase production costs for manufacturing industries in China. International investors are moving their companies to Southeast Asian countries for cheaper labor.

So the demographic structure changes at home force China to transform its economic growth model. Trade based on cheap labor is no longer a reliable economic booster.

China’s new advantage is its huge market, which means strong domestic demand, and great potential to improve the quality of its workers to upgrade its industries especially in some emerging technologies and sectors, such as new energy and modern service industries.

If the transformation was only an option 10 years ago, it’s compulsory now.