L’espoir Africain: La chine n’est plus un pays à bas couts

China’s explosive economic growth has largely been driven by its booming exports.  And its exports have been driven by its low cost of production. However, with its working age population shrinking, wages have been on the rise.  And global manufacturers have increasingly moved toward even lower cost countries.

“China is no longer a low-cost producer,” writes KKR’s Henry McVey.

“Importantly, we think rising wages, particularly at the low end, are a structural phenomenon as the population of younger workers aged 15-29 will shrink at an average pace of five million a year between now and 2030, largely due to the one-child policy implemented in 1979. By comparison, this age bracket had actually been growing by two to three million per year annually until recently.”

Here’s a chart from McVey’s report showing wage trends in Asia’s lowest cost countries:

source: business insider