Fareed Zakaria: What Does China Want?

Fareed Zakaria writes from Beijing for the Washington Post:

While Wall Street frets about an overheating China, most people here seemed sure that the government would be able to adjust to keep growth steady — as it has in the past. Worried about a frothy real estate market in Beijing? Well, banks have been ordered to stop giving mortgages, and property taxes are set to be raised. Beijingers cannot buy more than one apartment per family. Once the froth subsides, the rules will, in all likelihood, be revoked.

But deeper changes are also underway. China has had dramatic labor protests in recent weeks, from at a Honda factory to grim accounts of suicide at the vast complex, where iPhones are assembled. One scholar calls this “the end of the world-factory model,” under which China would be the globe’s low-wage manufacturer. “Our economy can’t keep squeezing labor benefits because workers are unwilling to accept it,” says Chang Kai, director of the Renmin University’s Labor Institute.

This is a far cry from the government’s attitude only a few years ago, when officials warned that if Chinese workers asked for pay raises, businesses would move to Vietnam and Cambodia. In 2003 Zhang Zhixiong, deputy chairman of the labor union for Hyundai in Beijing, said, “Strikes in China jeopardize the country’s reputation,” and promised there would be none. Now Lee Chang-hee, at Beijing’s International Labor Organization, predicts that unions and collective bargaining are inevitably going to become part of China’s landscape, driving up wages.

Also related, see “Changes in China Could Raise Prices Worldwide” from the New York Times.

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