Stumbling Giant- The Threats to China’s Future

China has grown rapidly as a low-cost manufacturer and by huge state investment into capital projects. Unfortunately, a reducing work force, rising currency and increasing labor costs prejudice the continuation of the cheap manufacturing strategy. Falling returns make capital investment less sustainable. Beijing recognises that the economy must be refocused towards domestic consumption and innovation to find a new growth path. Unfortunately, the consumer is not spending, for reasons such as concern about inadequate social security, and most Chinese high tech exports are made by foreign-invested firms. The route to continuing growth is not following the plans.