The end of the Chinese economic miracle?

China's economy is in a state of crisis, an idea now accepted by a growing consensus of economists and analysts, according to George Friedman of global intelligence firm Stratfor.

Friedman says the conversation is moving from how quickly China will overtake the United States to the consequences of a major Chinese crash.

Whether or not this consensus is on point is yet to be seen, but a range of analysts from Paul Krugman to China experts at Goldman Sachs now argue, in different ways, that China's economic model has run its course:

"The country's whole way of doing business, the economic system that has driven three decades of incredible growth, has reached its limits. You could say that the Chinese model is about to hit its Great Wall, and the only question now is just how bad the crash will be," Krugman wrote in a recent article for the New York Times.

Friedman argues that it's only a matter of time before the competitive wage advantage, enjoyed by China for so long, finds a new home:

"China's growth surge was built on a very unglamorous fact: Chinese wages were far below Western wages, and therefore the Chinese were able to produce a certain class of products at lower cost than possible in the West. The Chinese built businesses around this, and Western companies built factories in China to take advantage of the differential. For this to continue, China [has] to maintain its wage differential indefinitely."

China's "surplus of workers," which allowed the low wages to persist, seems to be running out, opening the door for other developing countries to attract foreign companies:

"No one country can replace China, but China will be replaced. The next step in this process is identifying China's successors."

And the mask of the Chinese economy – its often dazzling statistics – may now be slipping out of place, exposing an uglier reality. (Anyone who has tried to gather robust economic data on China will speak of the difficulty of the task).

As Beijing and major international banks continue to ease their Chinese economic projections downward in a steady, orderly fashion, one increasingly suspects that the cracks in the Chinese economy are growing quite quickly indeed.

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