One of the announcements came from Federal Reserve Chairperson Janet Yellen who kept interest rates unchanges but remains wary of the fluctuation in oil prices as well as the global economic developments, particularly in China.
With the wide news coverage of China's economic performance, it is not unusual to know that China's economy is not performing as well as it used to and is slowing down at an alarming rate (Although it is still outperforming Singapore's growth; 3% compared to 6.5% in China).
So now what is this big hoo-hah with China's economy that is worrying most of the world's leaders?
China's economic growth engine is slowing down and it is mainly due to one reason: The end of its migrant boom. Its rural population have stopped moving into the cities and those who have moved in the past are returning to their rural towns. The explosive economic boom made possible through the migration of cheap labour from rural cities is starting to face exhaustion from raising labour cost and diminishing productivity returns. This is due to the discrepancy of supply and demand in their labour's skill set. Low-skilled workers are losing their jobs as China moves up the value curve to "middle-skilled jobs and, in many coastal cities, to upper-level sophisticated jobs - competing with the middle-class everywhere.". (quoted from DPM Tharman Shanmugaratnam in View China's economic woes in perspective': Tharman,).
To understand more about the migrant-led economic boom, you can refer to this video which is very informative on the phenomena: https://www.youtube.com/embed/t487ILVf87k
So now what is this big hoo-hah with China's economy that is worrying most of the world's leaders?
China's economic growth engine is slowing down and it is mainly due to one reason: The end of its migrant boom. Its rural population have stopped moving into the cities and those who have moved in the past are returning to their rural towns. The explosive economic boom made possible through the migration of cheap labour from rural cities is starting to face exhaustion from raising labour cost and diminishing productivity returns. This is due to the discrepancy of supply and demand in their labour's skill set. Low-skilled workers are losing their jobs as China moves up the value curve to "middle-skilled jobs and, in many coastal cities, to upper-level sophisticated jobs - competing with the middle-class everywhere.". (quoted from DPM Tharman Shanmugaratnam in View China's economic woes in perspective': Tharman,).
To understand more about the migrant-led economic boom, you can refer to this video which is very informative on the phenomena: https://www.youtube.com/embed/t487ILVf87k
However, I feel that China is not completely buried in the grave; it can still help itself in its current predicament. Firstly, the current situation had been experienced by many developed countries where there is a displacement of labour workers to higher value service workers. Hence, it has some case studies to follow and mimic according to its current situation. It has the resources and power to smoothen and ease the labour transition.
Secondly, the current predicament may present itself as a opportunity for China as workers move back to the rural areas, bringing with them capital and experience. If given the necessary push and policies, a more even growth can be attained, boosting the general economic growth since urban cities usually have a lower growth opportunity due to their inherent peak productivity performance derived from structural benefits.
Singapore, being extremely dependent on China's performance due to its close trading relationship, would definitely experience the impact from China's stance and reactions to its current status. Hence, it is important to know how our neighbouring countries are performing.
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