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PeakTrader said...

I asked this question before. Who's better off?

China's per capita real income rising from $500 to $3,000, while U.S. per capita real income rising from $15,000 to $45,000 over the same period?

China gained 500%, while the U.S. gained 200%.

Or, China gained $2,500, while the U.S. gained $30,000.

However, U.S. real per capita GDP has been flat the past four years, at around $43,000, while China is expected to add another $3,000 to real per capita GDP by 2020:

China's per capita GDP to hit US $3,000 by 2010
(Xinhua)
2008-01-04

China's per capita GDP will reach 3,000 US dollars by 2010...the figure would reach 6,000 US dollars in 2020 if it maintained the current growth rate.

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PeakTrader said...

China will likely face barriers to growth much faster than Japan, e.g. through depletable resources, aging population (one-child policy), political unrest or rebellion, the "growth-at-any-cost" policy, etc.

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Hydra said...

When it comes to defense spending, only the gross amount of gdp matters.

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PeakTrader said...

Hydra, a more important priority for China may be how to deal with one billion dirt poor people, particularly when they get close to retirement age.

I suspect, if China's GDP surpasses U.S. GDP and China spends more on defense than the U.S., the U.S. will build a stronger alliance with the E.U., Japan, India, Taiwan, South Korea, and many other countries (the Roman Empire wasn't just Italy).

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PeakTrader said...

It's easy to achieve a high GDP growth rate with the lowest labor costs and lowest prices in the world (and resulting in China's household consumption falling from 45% of GDP in 2000 to 36% in 2010):

Just How Cheap is Chinese Labor?
DECEMBER 13, 2004
Businessweek

"The cost of Chinese factory labor is a paltry 64 cents an hour (in 2002)...It includes both wages and employer contributions for benefits and social insurance. For comparison, hourly factory compensation in the U.S. in 2002 was $21.11."

The end of cheap Chinese labour?
Jul 18th 2010
The Economist

"Compensation of Chinese manufacturing workers was only $0.81 per hour in 2006—just 2.7% of comparable costs in the U.S...Even if Chinese manufacturing wages increased at an average annual rate of 25% over the 2007-10 period—highly unlikely for reasons noted below—the hourly compensation rate would be just $1.98 in 2010.

That would boost Chinese compensation to only about 4% of U.S. pay rates...At $1.98 per hour in 2010, Chinese hourly compensation in manufacturing would still be less than 15% of that elsewhere in East Asia (ex Japan)."

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PeakTrader said...

Morganovich, a problem with China reaching the "Lewisian Turning Point" (or labor shortages) is China's skill level hasn't risen much to justify higher wages, in part, because it gave up too much in the global economy to maintain abnormally high growth rates, which restricted improvements in its labor force:

The end of cheap Chinese labour?
Jul 18th 2010
The Economist

"As costs have risen in China, long the world’s shop floor, it is slowly losing work to countries like Bangladesh, Vietnam and Cambodia — at least for cheaper, labor-intensive goods like casual clothes, toys and simple electronics that do not necessarily require literate workers and can tolerate unreliable transportation systems and electrical grids.

Li & Fung, a Hong Kong company that handles sourcing and apparel manufacturing for companies like Wal-Mart and Liz Claiborne, reported that its production in Bangladesh jumped 20 percent last year, while China, its biggest supplier, slid 5 percent."

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