The road of restructuring ahead

Cheming Yang

According to WTO’s statistics, China’s trade in goods in 2013 totaled USD 4.16 trillion, becoming the largest goods trader in the world. This is definitely a milestone that is worthy of noting. The next big question is what lies ahead. Just like Minister Gao of MOFCOM said, “the fruit is not easily earned, and the development path ahead will not be even.”

China manufactures a lot of things. The volume of export is huge. Most of the volume is churned out by labor intensive industries. The price of labors used to be cheap, which is no longer true. The profit margin used to be small and it’s getting smaller. The problem then becomes how to maintain profitable and even have bigger profit margins in the wake of rising wages. That necessitates another round of restructuring in economic development.
According to Wikipedia, economic restructuring refers to the phenomenon of Western urban areas shifting from a manufacturing to a service sector economic base. This transformation will affect demographics including income distribution, employment, and social hierarchy; institutional arrangements including the growth of the corporate complex, specialized producer services, capital mobility, informal economy, nonstandard work, and public outlays; as well as geographic spacing including the rise of world cities, spatial mismatch, and metropolitan growth differentials.
In plain English, China needs to be able to sell pricier goods or sell more valuable things. This entails the shift into more technology intensive industries or the shift into a different sector of industry, for instance the service industry. This is straightforward and quite comprehensible. However, it is usually easier said than done.
Judging from the history of economic restructuring in the west, there are probably more failures than successes. The economic downturn in the US and European countries in recent years attest to the statement that the development path ahead will not be even. In reviewing the mistakes that have been made in the past, it begets more questions than answers.
There are many factors that will impact on the fate of restructuring or transformation. But there is one important factor that is easily overlooked and in the end it comes back to haunt you. People oftentimes focus on the gain of changes but ignore how the gain is distributed. The problem is equity. If the benefit of changing concentrates on a few, the transformation will not be healthy down the road. The total volume of wealth might increase as a result of economic restructuring, but more and more people will fall behind if the distribution is not equitable. That is to say, more people are better off is more important than the total national wealth is greater in terms of the aims economic transformation hopes to achieve. The road is definitely not even, but we need to have an even mind when we travel this treacherous ground.


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