The actual truth is more complex. As we’ve covered in "Tidbits" previously, China’s low cost labor advantage is actually more transient than permanent, as with many advantages that global competitive forces can attack. Because of factors such as the one child policy and greater urbanization (which is a natural birth rate inhibitor), the number of 15 year olds (a reliable proxy for the new supply of cheap labor) will steadily decline in coming years. Such demographic trends are largely unalterable, as they have already been set into motion many years previously.

This recent Economist article examines the problems some companies are having with turnover. A Hewitt Associates study pegs China’s turnover rate at 12.6%, and all of the Chinese companies surveyed by Hewitt expect wages to increase in 2005.

Because of both rising labor costs and labor shortages, some companies are actually considering outsourcing from China, according to the Economist. (Did you ever think you’d be reading that phrase?) Vietnam and Cambodia are likely venues.

In a global economy, labor costs can invariably be undercut, particularly as a labor forces in a particular region or country becomes more skilled and more costly. China is not exempt from this inevitability.