Higher wages making China lose competitive edge...

China’s economic expansion of the last three decades has come to a point where employment and productivity could not increase with the pace realized during the boom. An economy swings between boom and busts due to increase in money-supply and inflation and deflation/disinflation. Monetary-policy cycle of expansion and tightening decide the level of employment and trade-cycles. Expansion turns the boom and tightening turns the burst. Every economy goes through booms and bursts. However, the length of trade cycles might vary from time to time and country to country, but it may also affect other countries through trade. Moreover, the economy is also on the knife-edge which means when the policy-makers try to reduce inflation and growth it would lower them more than expected and when they choose to increase both, they increase them more than expected. It is true that the economy goes through boom and bust over a period of time. Booms can go as long as employment increase, but after full-employment inflation increases which reduces domestic demand. Depreciation increases exports, but at the cost of domestic demand. Higher inflation would lower real wages. Full-employment may increase supply to a level, but productivity may be increased through more investment in innovation, but it is a natural process of mind and may or may not happen at once. China is boxed by full-employment but if it manages to increase productivity it might continue expanding at a higher growth-rate. If more money supply increases productivity and wages then the expansion is justified, however if it increases inflation and wages it would reduce competitiveness. China is trying devaluation of currency for competitiveness when full-employment and higher wages are working against it...