Declining labour force threatens Chinese economy

China’s economic miracle is under threat from a slowing economy and a dwindling labour force. The FT investigates how the world’s most populous country has reached a critical new chapter in its history.

The abundance of cheap labour in China is coming to an end. Since the 1980’s low cost Chinese labour has supplied the developed world with cheap goods, which, to some extent, make up for stagnate wages. When China became more industrialised it grew very fast by importing foreign technology and employing capital and plentiful, cheap, unskilled labour from the rural areas. However, a point is reached when no more labour is forthcoming from the underdeveloped, or agricultural, sector and wages begin to rise.  As well as wages increasing China has also experienced labour strikes and shortages, prompting many researchers to debate whether the Lewis turning point has been reached. Below is a very good video clip from the FT on this topic.

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