Market Overview

Post-China 16

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 Post-China 16

 


There’s always someone waiting to dethrone the one in the position at the top of the roost, isn’t there? This dethroning ceremony will be attended by the global economy and will see investment and capital flow from China just as soon as it has entered the non-profitable area of being too expensive for those that are the world’s producers. The capital will not be flowing back into the Western world either. It will be going there where the prices will still be the lowest on the planet and where exploitation of human resources and raw materials will be a ticket that is a well-seasoned route to success today.16 countries have been identified as the successors waiting to take over when China has crossed the border from low-wages and high-growth into high wages and low growth. It is teetering on the cusp of that right now and within the next few years. The outflow of investment and companies from China is now already starting to go in the direction of other countries as they gear up for the change-over of China’s economy into another new era of more western-style economics and rising standards of living across the country from increased wealth.


PC16


PC16


PC16


The Post-China16 (PC16) will be necessary since to replace China and fill in for her on the international scene means having a staggering economy and an army of workers. It will take 16 countries to do that job today. The new workshop of the world will be EthiopiaKenyaTanzaniaUgandaVietnam,Laos and Myanmar amongst others. These countries are considered by theGlobal Intelligence think-tank Strategic Forecasting Inc. as the countries that have the best potential at being the low-cost hub and export-platform of the world’s economies. The Chairman of the Strategic Forecasting Inc. George Friedman states that “In general, we are seeing a continual flow of companies leaving China, or choosing not to invest in China, and going to these countries. This flow is now quickening”. The 16 countries all have more or less the same stage of economic activity at the present time, which is essential due to the fact that they will grow together to replace China.


Forecast?


The PC16 is not just an arbitrary list of cheap-labor countries that seems like a good bet to announce, but they are the countries that are already seeing an increase today in their economic activity. It is happening right at the present time in the here and now and in no way is just a statistician’s forecast of what the future holds. However, one thing that needs to be taken into consideration is the high-risk that will need to be factored in regarding the instability of many of those countries in the PC16-list. But, perhaps back in the 1970s it was exactly the same for China. The world thought, at least in part, that it would be impossible for China to coordinate economic activity and align that with totalitarian power of Communist rule. It has been possible, but how much longer that might be the case is another question that will show through when the structural reforms are made in the future.


China managed to build its present on the fact that the coordination of a hoard of workers meant that they were easily exploitable by the state and the Chinese administration with the objective of making sure that global markets were conquered. However, that is drawing to a close as China overtakes other countries in terms of production costs and wages increase. There are other countries that are cheaper. No country remains in the static position that it has always been in. Germany was poverty-stricken and insignificant on the economic scene in the mid-1800s. A century later and still today it has transformed itself into one of the strongest economies in the world. That type of change is revolutionary.


The thing that the PC16 will be selling off to the rest of the world is the key element that they are presently most-known for in the world. It’s their poverty that they will be selling to us all. With that sale there needs to be discipline of the workers (that came with the brain-washing of Communist countries with great ease). The fabric of society will be completely changed as local entrepreneurs and foreign investors exploit in brutal fashion, enslaving workers to produce at low costs. But, slowly, complex production methods are introduced and will lead to a rise in wage demands as production becomes more profitable. Capitalism will have set in and altered those countries in just a few decades.


PC16: Ethiopia


PC16: Ethiopia


  • It is primarily garment and footwear manufacturers that are firstly starting to relocate in the PC16 countries.

  • The second area where there has been a change-over is the market of cell-phone assembly operations.

  • In the first field it’s the skills that are easily exploitable in the workforce.

  • In the second sector of activity is the need to have low-prices to be competitive.

  • 50 Turkish garment factories are currently relocating to Ethiopia for example.

  • Hennes & Mauritz AB (H&M) are also currently considering purchasing more than 1 million garments from Ethiopia every month.

  • Costs per unit in Ethiopia are 50% cheaper than in China at the moment.

  • However, this is estimated to rise to the current Chinese level by 2019.

  • Chinese salaries increased last year by 17.1% and the previous year it was 18%.

  • Salaries in China are on average just 30% lower than in the US today.

  • Salaries in China now exceed those in Mexico and in Turkey.

  • Ethiopia has an economic growth of 10% today.

  • However, it remains one of the poorest countries in the world despite having one of the top economic-growth prospects of the continent.


All too often these PC16 countries have poor freedom ratings and are considered to be outside of human-rights issues (but who isn’t these days?). Their economies are in the main based upon agriculture at present, but that is changing and will do so in the future.


The only question that remains to be asked is what happens once the PC16 have been used and abused by the world economies and we have exploited them until their own economies increase sufficiently for them to go through their own personal deep-transition period? Where will we go afterwards to produce? Will things come full-circle and will we produce back in the Western world and start the ball rolling once again in a continuous cyclical change of geopolitical transformation of economic power?


What do you think will happen next?

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Economics Markets

 

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