Ten things about China that Europeans should take note of

Linda Yueh of the University of Oxford's Pembroke College is a specialist of China and was on a panel last Friday at the Future of Europe Summit in Andorra (see previous posts). Her analysis came across as brilliant and cogent, so after the panel I asked her what were the ten things about current China (beyond the obvious) that European policymaker and businesses should know about. Here they are:

1. Labour shortages in coastal regions are driving up costs and result from the low level of labour mobility in China. For instance, in 1999, 78 per cent of urban workers were still in their first jobs, and inter-provincial mobility is restricted.
2. Wages on the coast were the same as the interior in 1979, but are now twice as high.
3. Three-quarters of China's GDP is generated by the coastal provinces.
4. More than half of Chinese exports since the mid 1990s were produced by foreign-invested enterprises, which suggests the extent of global integration.
5. Chinese trade is characterised by high levels of two-way trade, leading to significant amount of intra-industry trade. The role of multinational corporations in making production decisions is therefore significant to its prospects.
6. China's regional disparities are getting worse, not better. There is a fall in intra-provincial inequality, but a rise in inter-provincial inequality.
7. Most of China's economic growth thus far can be accounted for by better use of factors and factor reorientation, and not by technological advances.
8. Enterprises on China's two main stock markets tend to be subsidiaries of state-owned enterprises (SOEs), such that China has retained control of the major SOEs.
9. China has had a low inflationary impact on the global economy, on account of reducing global manufactured goods which is not offset by supply side pressures from its demand of inputs such as energy.
10. China's comparative advantage is dynamic and diverse, reflecting the scale of its economy, such that its wider impact will be felt across sectors in Europe. The response of Europe must be to have government policies which support productivity and innovation across its economy for businesses and workers, and to develop the size of its common market to maintain scale which is crucial in light of the integration of such sizeable countries as China.