China as an Absolute Advantage Economy
8 hours ago
- #Wage Suppression
- #Absolute Advantage
- #Trade Competitiveness
- Explains David Ricardo's comparative advantage theory, which emphasizes specialization and trade without competition.
- Contrasts with Michael Porter's competitive advantage theory, focusing on competition across all industries.
- Describes China as an absolute-advantage economy that competes globally in both high-end (e.g., AI, EVs) and low-end (e.g., textiles) markets simultaneously.
- Highlights China's unique ability to maintain competitiveness across all industries, unlike South Korea and Taiwan which shifted away from textiles as they grew richer.
- Notes China's rising trade competitiveness ratios across nearly all industries from the mid-2000s to 2023, despite a sixfold increase in per capita income.
- Attributes China's low prices to an exceptionally low labor share of income, not high productivity, with manufacturing wage share falling from 6.3% (1992) to around 3.3% (2024).
- Argues that suppressed wages transfer income from households to companies and the state, enabling large-scale investments in infrastructure and technology.
- Suggests that China's economic model deliberately overrides free-market logic to keep wages low, akin to an economy Karl Marx feared.
- Connects wage suppression to China's global power in supply chains but notes it doesn't translate to proportional prosperity for workers, leading to issues like overcapacity and underconsumption.
- Includes a reader comment highlighting rising living standards in China, comparing consumption to countries with similar GDP per capita, and viewing China's economy as continent-sized with internal shifts.