Finally, China is able to put aside the GDP number.

-- Deepening globalization has caused benefits, which China gains by exporting low end products, less attractive when compared with the resulting economic, environmental, and financial costs
-- Housing-driven economic growth has also weighed significantly behind China’s sluggish domestic consumption and thus lagging industrial upgrading
-- Beneficiaries behind less profitable exports and less affordable housing now may be only a small group of people but at a large cost for the whole country
-- We are finally seeing a possibility for China to integrate interests of different groups and head into a big vision

There is no doubt that decades of export-focused activities did ever play a positive role in converting oversea savings into investments in China and as well bringing employment for the rural labor.

However, the increasing awareness of social and environmental costs that come with labor income growth, which were reasonable to be ignored when there was no saving to make investment, together with quickly declining demand for foreign investment and shrinking profit among China’s export industries, are causing people to reassess China’s export-focused model.

It is particularly true when we go further to measure the financial risks and economic costs caused by China’s heavy reliance on low-end product export. For example, China’s foreign reserves, a byproduct of export-focused economy, have been facing increasing risk from unrestrained QE of advanced countries.

At the same time, the resulting long-term mismatch between the RMB growth and the output growth of China’s domestic products and services has played in distorting money’s prices and thus creating extra costs for the economy.

In fact, other than exchanging those foreign reserves with some luxury handbags, those money have nowhere to go while they are supposed to be spent to soak up the additional printed RMB in the economy.

Therefore, while still creating employment, China's low end product export may not  be contributing positively to this country as a whole but only to a small interest group in which you can probably see owners of export manufacturers, local government, related interest groups, and certainly overseas consumers. Similarly, the interest groups, but not long-term state interest, also stand behind the losing control of housing prices in China.

The increasing improvement and coverage of the employment insurance system, by utilizing its accumulated foreign reserves, will be able to help China gradually get rid of heavy reliance of its rural labor employment on export and housing.

#china #investments #money #housing #employment #export