Everybody knows China is making a lot of things, from T-shirts to cars. It’s clear why they want to make cars: Those are high-margin products. But why are they still also manufacturing low-margin items like T-shirts? After all, other East Asian countries like Japan aren’t producing clothing any more.
Yasheng Huang argues that China’s economic strategy is fundamentally different from other East Asian countries:
The idea that China has pursued an East Asian model is plainly wrong.
He argues that this is by design:
Karl Marx argued that capitalism would squeeze workers so hard that they could no longer afford to buy what they made. He turned out to be wrong about market economies […] A free market, left alone, has reason not to squeeze labor too far. It takes a state to override that logic and hold wages down on purpose. That is what China has done. In effect it has built the kind of economy Marx feared, and it has done so deliberately.
Huang isn’t explicit how he thinks China achieves artificially low wages. He may be thinking about the Hokou system, which results in a large population of migrant workers.
Nehaveigur 