A combination of cheap labor and a can-do attitude has transformed China from a mainly agricultural society to one that has become the world’s factory. It has gone from being a maker of mostly low-tech products like footwear Christmas decorations, toys and clothing to producing TVs, fridge, Computers and Handsets. Now Everything from cars to toys to highly delicate electronic goods such as your iPhone or Ipad tablet are made in China.
China's economy grew at highest growth rate in the world during the period 1990–2004. China's GDP grew 10.0% in 2003, 10.1%, in 2004, and even faster 10.4% in 2005. China's total trade in 2010 surpassed $2.97 trillion, making China the world's second-largest trading nation after the U.S. And China is the biggest exporter to the US beating Japan in 2010.
From 2011 onward, however, China has been experiencing a slowing of its growth that throws all of the above calculations into doubt. Economists foresaw Chinese GDP falling to 4-5% due to failure to switch successfully from relying on export to more domestic consumption
No longer the factory of the world?
Due to the significant appreciation of Chinese currency Yuan and the rising labor cost, China’s economy is at a crossroads as it enters 2011. This shift is causing many economists to predict the end of China’s status as the world factory.
Low-end manufacturing seems to be un-sustainable in China. High-end manufacturing will be the only engine to make Chinese economy grow during the next decades.
China now is facing two major challenges in the short and long run. The first one is referred to as "Medium Income Trap", while the second is the aging population and the end of the endless cheap labor in China. But Chinese economic growth still has a great potential. Despite low governmental debts, huge reserves and solid infrastructure, urbanization potential and population structure are sufficient to sustain the long term growth.
The development of high-end manufacturing in China at the current stage will focus on, high-precision and complicated industrial mould making, aviation equipment, satellites, rail systems, oceaneering equipment and intelligent manufacturing. In recent years, R&D spending in China has reached a world leading level and large corporations have emerged in IT and manufacturing through organic growth and M&A, e.g. Baidu and Midea. In new technology development, some Chinese companies start to show strong competence in solar and IT industries. Hopefully, more companies will become innovative and help to transform the overall economic growth pattern.