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Excerpts:
"China is no longer the low wage paradise it once was, and employees will continue to press for higher wages and better benefits.
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The bigger rebalancing story, that is the shift from an investment based to a consumption-based economy, cannot take place in a couple of years, as many observers seem to believe. It will play out over the next decade. For the last two decades, the principal driver of GDP growth in China has been investment spending.
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Two major problems with the scale of investment spending in China have emerged: first and more recently, it has been debt financed, forcing a rapid rise in the country’s debt burden, and second, the expected return on investment has sharply declined. Wages will continue to rise, but economic rebalancing has no quick fix. Investment spending will slow, but consumer spending cannot take up all the slack, which is why our outlook for GDP growth, between 5.5% and 6.5%, is lower than consensus."
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