China Still Has Its Competitive Mojo

Rising labor costs and a 6.6 percent year-over-year drop in exports in the first quarter has investors concerned that China might have lost the competitive edge it has used for years to fuel rapid growth. Not to worry: while the country’s share of global exports may not increase, it certainly won’t shrink, according to a recent Credit Suisse report. Once shipments to Hong Kong are excluded, Chinese exports actually grew 6.7 percent in the first quarter. The disparity stems from a recent government crackdown on companies that were fiddling their export numbers to the territory. China has also gained market share over the last few years in the electronics assembly export sector while holding its own in manufacturing, especially in goods such as clothing, shoes and furniture. And although wages are rising, they’re still low relative to the developed world, and Chinese manufacturing is increasingly moving from coastal centers to lower-cost inland areas. 
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First published in 2014 in The Financialist.