Trump steamer scuppers a slow boat from China

Just when Chinese wages outstrip other emerging markets, the country faces protectionism. Is globalisation in its death throes to be replaced by a phase of "deglobalisation"?

If anyone was looking for the benefits of globalisation they need look no further than China. That is not say there are not disbenefits to be found in the US rust belt and deindustrialised areas like the north of Britain. But Chinese prosperity has progressed dramatically since its low-wage workforce made it the new "Workshop of the World".

Yes, we have no bananas

The wheel has turned: Chinese wages are surpassing those in places like Latin America. China has already seen the effects of wage inflation forcing industries migration inland, away from the higher-cost coastal cities. Chinese productivity is high and rising meaning Chinese workers can still expect further wages rises.

Evidence that Chinese labour risks pricing itself out of the global market comes at a bad time: Chinese Premier Li Keqiang warned the National People’s Congress at its annual meeting in this, the Chinese, Year of the Rooster, that the economic growth target was being cut (to a still respectable 6.5%, but way below the double-digit figures of recent years).

Little to crow about

Mr. Li has little to crow about in a country also beset by soaring domestic debt, corruption, "zombie enterprises" producing for the sake of production, not to meet demand, and by pervasive smog spewing out of its factories and cars.

But a bigger and less manageable problem is on the horizon. Just at a time when wage growth is paring competitiveness, China faces the threat of protectionism from the new "cock of the global walk" Mr. "Buy American, Hire American" Donald Trump.

Chinese takeaway

Mr. Trump is a "Johnny come lately" to trends in world trade. Yet he is seeking to label China a currency manipulator, accusing Germany of economic Blitz Krieg across Europe and shredding trade agreements north, south, east and west.

While China is already committed to increasing domestic demand, that has stimulated a risky, debt-driven housing boom. But the Chinese economic supertanker is turning - slowly.

Chinese wages still have room to rise, but there is the potential for Chinese companies to seek new, low-wage locations for their factories – in effect globalising. Such moves could keep down production costs, but also allow Chinese companies as sneak into new, bilateral free-trade zones Mr. Trump envisages with compliant trading partners.

Or will rising Chinese wages and the erection of trade barriers feed technology, like 3D printing, that will undermine the need for a growing proportion of international trade in manufactures?

Sound the retreat

Globalisation has seemed unstoppable over the past half century, but the stage is now set for retreat. The US administration wants to bring manufacturing "home" and China is about to lose its low-wage, competitive edge.

Add to that technological progress promising to reduce the risks, transport costs and time lags of importing goods from distant countries and the conditions are in place for globalisation to be thrown into reverse. The trend for the next half century might well be described as "deglobalisation".

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