C&B Notes

China’s Export Pain is Other Countries’ Gains

We have been closely following for a few years now China’s shrinking labor cost advantage.  China has many other tailwinds, but this two decade-plus labor cost arbitrage is the cornerstone of the Chinese Miracle.  Losing this advantage, even at the margin, will inevitably change the trajectory of growth in the country.  On the flip side, this relative change will make Turkey, Brazil, Mexico and others more competitive in manufacturing, which will have big benefits for workers in these countries.

Buying stuff from China isn’t such a bargain anymore.  One consequence of that: Companies that move freight from Mexico are getting busier.

China has long been the destination for companies looking to cut costs.  A huge population of untapped workers, along with a leadership keen to build out the country’s manufacturing infrastructure, made it the world’s best place to make things cheaply.  But nothing lasts forever.

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The biggest beneficiary is Mexico.  The country and its companies were hurt badly over the past decade by a loss of exports to China.  The trade shift could be a salve to the economic and social woes that have made some investors skittish of putting money there.

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via Thrive Capital