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America & Europe to Benefit from China’s Maturing Economy

The pace of Chinese economic growth is slowing and wages are increasing. As the economy matures, transitioning to service industries and importing more goods, the West stands to gain. 

What’s the Latest Development?

China’s breakneck pace of economic growth, in which GDP increased at about 10% annually over the last three decades, is expecting to chart a more modest path of 7% to 8% growth in the years ahead, according to senior government researchers. But because the number of farm workers ready to head to city factories is no longer growing rapidly, companies have struggled fill new employment positions. “The size of the workforce has plateaued, demographers say, and will start to shrink in the middle of the decade, intensifying competition for workers.”

What’s the Big Idea?

As the Chinese economy has grown, so have the wages of its workers. The rate of increase is so steep that, when factoring in productivity differences, China’s wages could grow above Mexico’s this year, according to the Boston Consulting Group. As a result, domestic demand is expected to account for more of China’s future growth. “The main beneficiaries of China’s rapid growth so far have been commodity exporters like iron ore-rich Australia and manufacturers of advanced machinery like Germany. In the future, producers of high-end consumer goods in the U.S. and Europe could enjoy more of the benefits.”

Photo credit: Shutterstock.com

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