10 Comments
User's avatar
Zhaozhe's avatar

If the RMB is strong and China is Pro labor, and real chinese wages go up. Then wouldn't it trigger a commodity supercycle? It would also trigger a massive consumption boom because half the country still has low incomes. Would not it also force chinese corporates upgrade themselves in the value chain? because if they cannot compete internationally in a strong RMB environment they would have huge layoffs and massive unemployment.

Expand full comment
Russell Clark's avatar

China is the key. Their policies have been so different to policies I am used to. Actively seeking a strong currency as opposed to currency devaluation we see elsewhere. Looking to cut overcapacity in various industries and push up prices of key inputs such as steel, and now looking to regulate big tech and property developers. China's pro-labour policies seem to be driving inflation - but so far, pro labour policies seem not to have spread. Equities seem to change in coming in the west, but credit markets not so much...

China export data suggest China remain competitive, so this dynamic could run

Expand full comment
GGGGGGGGG's avatar

Would you assume from this, that wages and labour supply conditions could be manipulated to effect interest rates / currency?

As with quantitative peopling in Australia.

Expand full comment
Russell Clark's avatar

Well Covid has greatly reduced immigration to the states.... and wages seem to be moving up.

Expand full comment
Andy's avatar

I'd like to pushback a little on your article. I agree that the worst of the deflationary spiral due to global wage competition is behind us BUT doesn't necessarily mean a reversion is on the cards. I really can't see anywhere signs of political movements focused on a labour revolution. It's true that more inflationary policies have been proposed recently (direct cheques in lockdown) but politicians have already started to move in the opposite direction especially in the US. Also GDP per capita probably not the best metric to measure impact of labour dynamics given it's an average rather than a true measure of the income generated by those affected by globalisation. Labour is an important part in the inflation/deflation debate but not the only one. Negative impact of demographics and technology is still there. Long story short, labour no longer source of deflation but don't think turning point is round the corner.

Expand full comment
Russell Clark's avatar

Agree - wages are very tricky to compare. A lot of this thinking has been prompted by Chinese policy in recent years - which seems to.be favouring labour over capital.

Elections in the US and UK have been decided in rustbelt states - which are prolabour... so conditions looked primed for a move to labour. Of course if.China devalues - then wage competition returns... but i think we have moved on.

Expand full comment
Mike Cross's avatar

Y3000 an hour was pretty much the going rate in Tokyo in 1982.

Expand full comment
Russell Clark's avatar

2000 yen was the lowest rate. Nova teachers earnt that. Private lessons paid much more

Expand full comment
Mike Cross's avatar

Exactly same in 1982. Y3000 was what I got at small jukus, with a Tefl qualification.

Expand full comment
Therrien, Mario's avatar

Very insightful. Tks Russell.

Expand full comment