This summer, China is going to put on a spectacular show for the world, the Summer Olympics. Events have been building up to this moment for years. The people of China are excited and proud. Government spending on related infrastructure projects has pushed the economy’s growth rate over 10%. Expectations are sky high. Will there be a letdown afterwards?

The answer to this question is complicated. If the people of China expect radical social and political change as a result of being in the world’s spotlight, they are likely to be disappointed. For example, recent worldwide protests over the treatment of Tibet have revealed the intransigence of Chinese authorities when it comes to reform. However, there are other changes underway in the country that require understanding.

For example, China has an endless supply of labor, right? Not exactly. One problem that has crept into the system is reduced labor mobility. Former agricultural workers from the interior need permits to move to the high-growth coastal cities. Millions of such individuals live in Shanghai and Beijing illegally. They are the backbone of the construction industry. A “blind eye” has been turned to their existence, but for how long?

Wage rates (while still incredibly low by the standards of industrialized nations) are starting to rise in China. As a result, industry is moving to become more capital intensive. This will mean continuing high demand for raw materials from outside the country.

One resource that China does have in abundance is coal. Coal-fired stations are the primary source of electric power generation. However, this means pollution. The dilemma for authorities is intensified by the fact that there are certain regions of the country, harboring millions of people, which still do not have electricity. Besides more coal-fired plants, a push is underway to proceed more intensively with nuclear power.

The net effect of all of the foregoing for government officials will be ongoing pressure, both from within and outside China, to deal with workplace and environmental issues.

Alex Carrick

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