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Another sign of rural China's growth

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February 24, 2010 – Comments (2)

What would never happen in China? Well, with a population of more than 1.3 billio, many would say a labor shortage (in fact, an oversupply of cheap labor is why that country has become the center of global manufacturing). But that may be changing. The WSJ reports on a growing labor shortage in urban China:

For a country which still has significant surplus labor, the reportedly severe shortage of migrant workers in China’s economic engines such as the Pearl River Delta after the Lunar New Year holiday is rather baffling.

Various domestic media reports put the labor supply gap at around a million people in Guangzhou and neighboring cities such as Dongguan, legendary centers of China’s export boom in the past three decades. Numerous assembly lines and construction sites are sitting idle while anxious employers have raised salaries by more than 30% but still can’t attract enough applicants.

What the heck has happened? Apparently rural China is becoming a more attractive place to live and work:

The lack of interest in such low-paying, physically demanding work partly stems from the second factor - the growing income at home for these farmers. Much to its credit, the Chinese government has consistently put developing agriculture and feeding the rural population (which measured 727.5 million in 2007) as its top priority over the years. An incessant stream of favorable policies, such as scrapping burdensome taxes and forceful market intervention, have increased rural incomes to the extent that farming is becoming more rewarding than cleaning skyscraper windows in some places.

China’s little-noticed reform to allow large state enterprises to rent farmland from peasants in order to modernize farming and boost productivity has started reaping fruits and also created a burgeoning group of idle farmers who can afford to live on their handsome rental income.

All told, I believe 2010 will be another good year for our rural China boom basket of stock picks.

2 Comments – Post Your Own

#1) On February 24, 2010 at 9:44 PM, FreeMortal (29.27) wrote:

It appears the urban real-estate boom is running on empty at this point. 

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#2) On February 25, 2010 at 10:02 AM, TMFMmbop (32.91) wrote:

Yes, I would avoid urban China real estate.

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