Why has China grown so rapidly?
There are lots of low-wage countries. In the ‘90s the “Asian Tigers” of Singapore, South Korea, Taiwan, and Hong Kong specialized in finance or high-tech manufacturing and developed rapidly. Now they are fixtures in the global economy, hosting some world-class businesses.
China has become a manufacturing powerhouse not simply via low labor costs, but from its solid logistical performance. Companies only put facilities in places where they can be productive, and to be productive they need adequate infrastructure, efficient services, consistent border procedures, and reliable delivery performance. China has created manufacturing clusters in its coastal regions with eye towards these factors.
Other low-wage countries would have to put decades of effort and pour billions of dollars into their trade infrastructure to put even a minor dent into China’s trade advantage. So as world trade has grown, China has been able to leverage this.
China’s extraordinary growth has been a natural result of its focus on logistics. Its market pullback has come not from external competition, but from internal factors.
Douglas R. Tengdin, CFA
Chief Investment Officer