Last month, the Peterson Institute for International Economics published a report warning of the severity of the “China Squeeze,” analyzing the impact of China’s economy on low- and middle-income countries. The term refers to an international economic phenomenon in which China continues to hold a dominant position in global manufacturing, even though the sector is closely associated with low wages and the country’s income level has risen substantially through economic growth. The accumulated history of international economics tells us that manufacturing has generally moved to places where wages are lower. China, however, has proved an unorthodox case where manufacturing industries do not flock to other developing countries with lower income levels, but instead remain in the country where wages have risen alongside economic growth. The biggest factor behind this phenomenon is China’s iron grip on global supply chains. China still retains control over materials and components by supplying them at low prices, making it increasingly difficult for firms that depend on them to leav
