Submission statement: MIT Sloan professor Yasheng Huang argues that rather than moving up the value chain and losing competitiveness in low-end industries (such as textile manufacturing) as it develops, China is able to remain competitive in both labor-intensive low-end and capital-intensive high-value industries. This upsets traditional notions of comparative advantage. He argues that this is because Chinese policy suppresses worker wages, which results in a wealth transfer from Chinese workers to Chinese companies and the government. This both allows low-end industries to remain competitive as labor costs remain low, and provides capital to allow Chinese companies to compete in high-value industries.
Posted by StarbeamII