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Their products are of very bad quality and when manufacturing costs through higher salaries, finaly rise, they will sink.
And if salaries don't rise, their economy will stay a third world economy.
It's a lose/lose situation.
Fredledingue:
This depends on whether the Chinese merely depend on western capital inflow or not. If so, then yes, China will not have any value added economy other than their cheap salaries. Once, their salaries rise up on par with the rest of the developing world, China will lose its edge.
However, from what I have heard, they have started developing their own business based on the western investments in the country. Such as car, other simpler machineries. Yes, their quality is left to be desired. But that same thing happened with the Japanese, Taiwanese, Koreans many years ago. Japanese, we all know how the Hondas and Toyotas kick the heck out of their American counterparts. Taiwanese is now home of the biggest supplier of semiconductor, Taiwan Semi Conductor (TSM) among others. Also, Acer of Taiwan has recently bought Gateway, an American company. Koreans, yes, their car has not been accepted internationally as the equal of the Japanese or Americans. But this decade, you have seen the emergence of Samsung and LG taking over the high-end side of the business.
Chinese, let's see. They are not that aggressive in the high tech sector. A couple notable ones was the purchase of 3Com by HuaWei, a router competitor of Cisco and Haier's attempting to purchase Maytag. They are still of lower quality, but hey, the Chinese don't only make socks and underwears. Soon, they will be able to make high quality routers and washing machines.
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