The implications of the end of cheap China

In his new book, “The End of Cheap China, Economic and Cultural Trends That Will Disrupt the World”, American researcher and author Shaun Rein delves into these scenarios and presents a compelling case that these changes are already happening, while offering suggestions as to how the outside world can best cope in a future where China is no longer the money-losing backwater economy of its past but an emerging superpower on the cusp of overtaking the US as the world’s largest economy.  

One of the first things American expatriates notice about living in the Cayman Islands is the cost. 

Everyday consumer goods are considerably more expensive in the archipelago than in the United States, no doubt a consequence of a lack of economies of scale and the necessity to import to the Islands virtually everything under the sun. 

Americans have grown accustomed to the availability of cheap goods – produced largely on the backs of cheap labour in China – as a decades-old phenomenon that has been at centre of driving a consumption-based economy responsible for the highest standard of living mankind has known.

And these cheap goods, though needless to say marked up upon importation, trickle into the Cayman Islands as the US is overwhelmingly the leading exporter to this British Overseas Territory. 

But what if the glut of cheap labour in China and the underlying reasons for its availability and in turn its production of the inexpensive products the West has come to expect were to vanish? What would become of the global economy?

What would the economy of the future look like?

And what would become of societies so used to the availability of cheap products to sustain such a high standard of living?  

In his new book, “The End of Cheap China, Economic and Cultural Trends That Will Disrupt the World”, American researcher and author Shaun Rein delves into these scenarios and presents a compelling case that these changes are already happening, while offering suggestions as to how the outside world can best cope in a future where China is no longer the money-losing backwater economy of its past but an emerging superpower on the cusp of overtaking the US as the world’s largest economy. 

Employing an engaging and informative prose, Rein, founder and managing director of the China Market Research Group, calls on his years of living and working in China to spin a concise read full of personal anecdotes, interviews and in-depth macroeconomic economic research to present a view of the changing landscape across all levels of Chinese society.

Ten chapters focus on different aspects of the country’s transformation and its larger implications for the world, including glimpses into the proliferation of Chinese billionaires; the history of the Communist regime and its inherent quest for internal stability; the importance and buying power of the modern Chinese woman; the differences between national and local government officials and their distinct challenges; public sector corruption; commercial and residential real estate markets; and the nation’s education system. 

But some of the most interesting and piercing reading comes by way of how Rein dissects the following questions:
“How rising labour and real estate costs are forcing manufacturers of cheap Chinese products to close, relocate, or move up the value stream?”;
“How the country’s move away from exports to domestic consumption will create opportunities for foreign brands to sell in China rather than just producing there?”;
How Chinese consumption will build pressure on the global commodities markets, causing both inflation and friction with other nations?”; and
“How China’s economic transformation spells the end of cheap consumption for Americans?” 

Through meticulous research and first-hand insight, Rein chronicles how at the heart of the changes is, among many things, the fact that China’s workers are demanding better wages and working conditions as the country has grown a nascent middle class of more than 300 million destined to get their own taste of the good life. Salaries for blue-collar Chinese workers have been soaring in recent years and the once vast supply of willing cheap labour is drying up as a desire for domestic consumer spending is taking hold.  

Companies worldwide have already begun the shift to find the next locale for the inexpensive production of cheap goods and also how to penetrate what was formally a secondary market in China, but is fast-becoming an all around global economic powerhouse. 

With a list of key action items to follow each chapter, the author presents a “how-to-deal with” and “what to expect from” a changing Chinese political, cultural and economic landscape for wanting businessmen and also interested lay people.  

How this will all play out on a global scale remains to be seen. There undoubtedly will be both positives and negatives to be drawn from China’s emergence as a global economic superpower. But what is certain is things will never be the same and decisions made today will shape the path toward tomorrow. Rein has a keen insight into this fact, and those interested in taking a look at what he has to say won’t be disappointed. 

“The end of cheap China is like a giant wave crashing down on the shoreline with full force,” Rein writes. “It is fruitless to try to dig in one’s heels to withstand the impact of the water, or to hope that life will be exactly the same before the wave came. Companies and people who do so will either get knocked down by the wave, or will remain standing but weakened. The best way to deal with a giant wave is to dive right into it, or jump on a surfboard and ride it all the way to land. 

“Corporations and countries that understand the nuanced changes occurring in China today – and are able to hop on their boards – will have the ride of a lifetime.” 

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