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Wednesday, November 12, 2008

China's Stimulus Package - Even More!

China's stimulus package What it says about about China in 2009 from the Economist. Best analysis I have read so far and asking the right questions. A major question, which the answers are worrisome, is why did China feel such a huge package necessary? 568 Billion is equal to 16% of China's GDP.

One area that people forget is China does not have the cheapest labor in the world. Businesses that require cheap labor are or have moved to Vietnam, Cambodia, Bangladesh, etc. What China offers is world class infrastructure, for example it's ports can handle more material than ones in the US due to investment, that reduces costs, as well as higher productivity than cheaper labor countries. Just because you have the cheapest labor per hour, does not mean you will produce the lowest price goods. There is labor per unit, transportation costs, etc.

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