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Home Publications Blogs Beat the Press China is Suffering from Both Labor Shortages and Surpluses (of the same type of labor)

China is Suffering from Both Labor Shortages and Surpluses (of the same type of labor)

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Sunday, 12 December 2010 21:16

Yep, that's when you know when your economy is really in trouble. The NYT told readers today that China is suffering from inflation:

"Wages have also risen sharply this year in coastal provinces amid reports of labor shortages and worker demands for higher pay. Many analysts expect more wage increases next year.

"That may be good for workers, analysts say, but it will also change the dynamics of the Chinese economy and its export sector while contributing to higher inflation."

One might think a good remedy for this situation would be to raise the value of China's currency, which would reduce exports and the demand for labor in export industries. This would alleviate the labor shortage and the upward pressure it places on wages and thereby inflation.

But, "Beijing contends that raising the value of its currency would hurt coastal factories that operate on thin profit margins, forcing them to lay off millions of workers."

Okay, so Beijing is worried that measures to alleviate the labor shortage that it is concerned about will lead to layoffs of workers. There is either something being seriously misreported in this news story or China's leadership has less understanding of economics than the leaders in the United States.

Comments (2)Add Comment
...
written by eRobin, December 13, 2010 7:51
What I don't know about China could fill China but does the problem have to do with the differences in Chinese regional economies? As far as I know (nearly nothing) it hasn't done a great job of balancing development. This apparent contradiction could be a result of that.
China Invented Simultaneous Shortages and Surpluses, Not the USA
written by izzatzo, December 13, 2010 9:32
There is either something being seriously misreported in this news story or China's leadership has less understanding of economics than the leaders in the United States.


Nonsense. China learned way before the USA that shortages and surpluses can exist at the same time. That's why it used a surplus of its own currency to create a global shortage via the trade deficit. That's what shortage means - quantity demanded exceeds quantity supplied at that price, or in this case the USA consuming more than it produces at that exchange rate.

When the USA finally figured out what was going on, it jumped on the bandwagon and used its own currency to create a domestic surplus of financing for houses, which created a shortage via a housing deficit, which acted to offset the trade deficit by shifting consumption demand from China to the USA housing sector to prevent a great recession.

While Austerians attempt to take credit for creating the first simultaneous shortages and surpluses in the USA housing sector, they actually stole the idea from China before it started protecting intellectual property rights under free trade.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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