China dead serious about the shift to consumer driven demand

A few years ago MR pointed out China was shifting to consumer driven demand, and that U.S. manufacturing was close to beating or outright beating China on price in manufacturing.

These have now become more widely spread ideas, possibly even the dominant views on two of the trends in China. From Bloomberg:

“The campaign to shift China to slower, consumption-driven growth and away from a dependence on exports and investment means the squeeze on U.S. workers from foreign competition will moderate at the same time that Chinese demand increases for U.S. products. The result: more and possibly better paying jobs for Americans and a major transformation in relations between the world’s No. 1 and No. 2 economies.

“China is changing from a producer model to a consumer model,” said Stephen Roach, a senior fellow at Yale University in New Haven, Connecticut, and former chairman of Morgan Stanley Asia. “That’s an enormous opportunity for the U.S.”

Surging Chinese exports blew a big hole in the U.S. labor market over the last quarter-century, all but wiping out some industries. As many as 2.4 million American jobs were lost from 1999 to 2011 as a result, according to calculations by David Autor, a professor at the Massachusetts Institute of Technology in Cambridge, and his fellow authors in a paper last year.

Now “the bleeding has stopped,” said Mark Gatterdam, chief executive officer of Hardwood Artisans, a furniture manufacturer in Elkwood, Virginia”

“The bleeding has stopped” China is really the only economy large enough to do significant damage to the US at this point.

So who is next? Which countries can disrupt the U.S. economy with both low wages AND the the supply chain which supports those low wages.

India? My off-the-top-of-my-head calculations give about 5 to 8 years before India becomes a manufacturing threat to the United States. The infrastructure there is simply too primitive.

African countries do not have the infrastructure to be able to supply enough goods either, so expect Africa to be 10-15 years away from being a meaningful drag on the U.S. middle class.

Additionally, I think essentially “all” of the information economy outsourcing has been done as well. There isn’t much more coding or lawyering to be done in India, Russia, or China that isn’t already being done.




Expert in business development, product development, and direct marketing. Developed strategic sales plans, product innovations, and business plans for multiple companies. Conceived the patent pending Spot Equivalent Futures (SEF) mechanism, which allows true replication of spot and swap like products in the futures space.

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