China’s rapid economic growth has relied on the low cost of capital, the low cost of labor, and low environmental costs. However, the “three low economic costs” no longer exist in China. It is difficult to manipulate the financial market to maintain the low cost of capital. Labor costs are increasing. Former Foxconn employees’ continuously committing suicide is an extreme reaction to employees long working hours and low pay. The demand for environmental protection is now high across the country. The protest in Shifang is the most recent example.
From 2007 to 2011, one quarter of China’s GDP came from net exportation, real estate development, and the automotive industry. However, in 2012, due to internal and external factors, net exportation, real estate development, and the automotive industry are all slowing down. After nearly 30 years of rapid growth, China has to face a period of economic correction with low economic growth and welfare.
Source: China Review News, July 9, 2012