Once, the thought of strikes in China would have been laughable. Not only because the People's Republic is a communist country — with its emphasis on workers' rights and the authoritarian political system — but because China was thought to have an inexhaustible supply of labor that would prevent workers from putting a floor on wages. Yet in recent weeks, China has experienced a wave of labor unrest. Workers have gone out on strike, shutting down factories and demanding — and winning — wage increases. This new economic reality has profound implications for China and its competitors.
With a population of 1.3 billion, it was assumed China would enjoy an endless supply of workers who would keep factories humming, fueling a relentless export machine and ensuring that China dominated low-cost manufacturing. In the past two decades, China has increased its share of the value added of global manufacturing from 2 percent to 18 percent, making it one of, if not the, world's largest exporter.