macroeconomic challenges of china

situation:
due to inflation, chinese prices are no longer competitive.
as a comparison, if us government subsidized, opening factory in new hampshire would be as competitive.
therefore chinese rmb won’t budge anymore.

experts had hoped that domestic spending would cover the gap in decreased exports
but chinese are good savers.
chinese: 40% saving, americans: 2% saving.
so the gap will not be reconciled.

result:
thousands of factories will close down because there is no profit to be made.

issue:
china factory practices are
workers are paid 20% of wages every month, until chinese new year when you pay the difference plus 13 month bonus
this chinese new year, we’re going to see a lot of factory owners disappear

first boom of china since markets were opened.
there will be panic.
real estate market has already dropped 20%

businesses are going somewhere else for labor.
losers of this situation: the lower class. the capitalists made all the money they needed in the boom of the past years.
but not many workers have risen to middle class yet.

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