China is experiencing a perfect storm in which its economic, social and labor foundations are being shaken. The problem is not new to Europe or the United States: young people and their discontent with a “culture of effort” in a society that stifles them without offering much hope for the future.

The ups and downs of circular capitalism. Every economy, like people, is a world, and simplification is always reckless. Even so, it is easy to recognize in today’s young Asians the European and North American youth of the 90s who did not submit to the precarious salary of a well-prepared, PhD-pocketed assembly line.

In the 90s and 2000s, two factors contributed to the relocation of the “world factories” to the Asian continent: on the one hand, the improvement of wage conditions in Western countries, and on the other hand, the entry of China and later other countries into the World Trade. Organization. “Offshoring” took the industry of the planet to countries such as Vietnam, Cambodia, Thailand, Bangladesh and, of course, China.

The beginning of the Asian locomotive. With low wages and limited labor rights, China became the World’s Great Factory. The Chinese produced everything at lower cost. Neither industry emissions nor employee training were taken into account. The only thing that mattered was producing with cheap labor and allowing the economy to grow rapidly.

These first young workers had little to no education, but they had a responsibility to earn a wage to support their families. Like any father or mother, they would not allow their children to live in the same conditions as themselves by ensuring they received a good education.

Generation change rebelsYoung people in Southeast Asia who have better education than their parents, live more comfortably, and do not have the added responsibilities of supporting a family no longer want to occupy the positions their parents occupied, even more so after seeing the working conditions their parents endured for years.

The problem is now on the same level as the rest of the world: a shortage of qualified personnel, increasing difficulty in retaining talent, high production costs and better working conditions. In China, 11.6 million new graduates are ready to enter the labor market this year.

China copies its policies to the WestFor decades, Chinese manufacturing has been accused of copying Western patents to produce low-quality products. What companies are trying to do in this case is copy the business models of big companies like Apple or Google and attract and retain qualified talent for an aging workforce.

Workplaces in Asia are tearing down walls and opening large windows to let in natural light. They are setting up crèches and cafeterias that provide free meals to employees, and even providing recreational and leisure areas. All to attract new engineers, doctors and developers to feel comfortable in the factory. Some factories have even moved to rural areas to attract young workers who are reluctant to migrate to big cities.

Young people do not want to work. Youth unemployment is a serious problem in China; the rate among those under 25 reached 21.3% last June. There are more than 96 million young people under the age of 25 in China, and more than 33 million of them have entered the labor market. In Spain, the unemployment rate among those under 25 was 30.03% in the last quarter, according to the Active Population Survey (EPA).

These figures show that many young people are looking for work and that many new graduates enter the job market each year. The problem, as in much of the Western world, is low wages and long working hours. Young Chinese have had enough and repeated Joe Biden’s famous words: “Pay them more.”

The locomotive now has to pay for the coal. Maintaining the production of the Great Factory that all of Asia in general and China in particular has put into production requires a great deal of effort. However, unlike their parents, the youth of 2023 have already graduated and are looking for a salary to match.

This is causing costs to rise, and brands are already starting to move production locations. Mattel, creator of the popular Barbie, produced 74% of its toys in China, Indonesia and Thailand. As costs increased, it moved most of its production to new factories in Brazil and Mexico. We see the same pattern in technology, where blockades of Chinese products, led by Apple, have led to production being transferred to India or other countries.

Perfect storm. The demographic crisis, which has seen China lose its population for the first time in 60 years, is joined by a labor crisis and a severely affected economy after the aggressive management of the Covid-19 pandemic stalled. With exports falling, it’s all creating a perfect storm for the country’s global decline. The Great Asian Factory is failing, and the days of low-cost manufacturing are numbered.

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Image | Pixabay

*A previous version of this article was published in August 2023.