Industrial Insight

Malinvestment in China…. | December 6, 2012

http://blogs.cfr.org/geographics/2012/12/05/laborchina/

Labor Data Show That China Is a Bubble Waiting to Burst

by Benn Steil and Dinah Walker
December 5, 2012

As our figure above shows, the share of the Chinese labor force working in manufacturing and construction, at 38%, is roughly twice the global average – towering well above manufacturing powerhouses like Germany (25%) and South Korea (23%). Manufacturing’s share of the Chinese work force, at 29%, is also 6 percentage points higher than the level at which other fast growing economies have typically begun slowing. Once that share exceeds 23%, according to analysis by Barry Eichengreen, it “becomes necessary to shift workers into services, where productivity growth is slower.” Construction’s share of the Chinese labor force, at 9%, is also 2 percentage points higher than in the United States at the peak of the housing bubble in September 2006. Labor data therefore suggest that China is headed for an extended slowdown in GDP growth.

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