sharpe_mind

Why China's Exporters Are Complaining Loudly

One other thing to mention about the recent noise made by China's exporters- it has all been from the very low end (textiles and toy producers) and all been in the Guangdong area. Considering that Shenzhen, just north of Hong Kong, was the very first Special Economic Zone (SEZ), and has been tremendously successful, it makes perfect sense that it should be the first one where wages rise to the point where the very low end is priced out (as higher value exports open up and take over). My suspicion is that part of the recent fervour has been Shenzhen's proximity to the Hong Kong press (which means the press has easy access to those complaining as well as a wide forum for airing their complaints), as well as the fact that many of the early established lower value added factories in Shenzhen are owned by Hong Kongers.

I'm in complete agreement with Mr. Pettis- the interior is picking up the lower end exports as the coast/south moves up the value chain. For example, China is starting to come up in heavier industry and capital goods, such as shipbuilding and autos, and the tertiary industry is growing strongly. Even so, exporter complaints may be beside the point and exactly what is needed. At this level of inflation, there _needs_ to be pain somewhere to bring inflation lower. If anything China has wanted to have its cake and eat it too. The very best thing for China would be pain concentrated in the export sector, as opposed to pain spread throughout the entire economy.