When you have a massive trade surplus it is inevitable that the valuation of the currencies will change and (therefore) reduce the competitive advantage you have (typically through inflation), or you will be forced to build up a massive reserve of foreign currency. If you choose to take this foreign currency and invest it in its country of origin you will (hopefully) build up a very large portfolio of investments and, in a similar fashion to retirement, you can slowly drain this investment portfolio to survive the reversal of the balance of trade without significant inflation or deflation.

Ahh, sorry I see what you mean now. I agree.

^Or you could keep your currency low on purpose like China does to have an export advantage over other countries.

Dead on. It's not impossible for them to create quality products. It's just more lucrative for them to make shoddy products en masse.

Except that's not the case. Manufacturing in the UK, for example, has been falling for decades, now, and yet, recessions aside, employment has been rising - since the 2000s, in particular: when the rise of Asia started to go into full swing, and manufacturing started leaving at a much faster rate, and yet unemployment had been falling rather rapidly, also.

This is because new jobs are being created at a faster rate than which they are being lost. This is directly attributed to globalisation. What's happening is that different countries have different things to offer. China can offer cheap labour, so it's taking manufacturing. The UK can't offer this, however, but it can offer a far more educated work force, so businesses that focus on these areas flourish in our country. Hence our financial and research industries - China won't be able to compete at a grand scale with these industries for many decades, and, then, when they do, our competitive advantage in other areas will grow, and we'll specialise into a different area, again.

The thing is Samuel, the impact that outsourcing jobs will have on a country isn't determined by track record, and you can't solidly say that because employment is now rising, and has been for some time in the UK, the same phenomena will occur in other developed countries. Look at it this way and make the comparrisson: Britain bewteen 1970- 2000 - supplemented workforce by HUGE increase in migration ; Joining of the EU = abundance of lucrative foreign investments in UK banks/buisnesses; radical overhaul of Welfare system ; augementing free market economy during the Thatcher years; relatively small population. : Therefore we've found that in this country employment is something that is more stable than say, the US, where tertiary and manufacturing co-exist in a free market economy, and jobs are scarce because of internal protectionism, and fierce competition to keep labor costs down. To curb long run unemployment is something that can't as easily be solved circumstancially, like the UK's.

I'm not sure it will grow though.

China is currently running on a "have your cake and eat it too model."

They've got a official gini coefficent higher then the US, and it's considered in reality MUCH higher because a lot of wealth is off the books.

The China plan seems to be to keep "poor" china and "rich" china divided... and try and dominate both markets.  It's really a brilliant twisting of Marx fundamental rule.

People don't care if they're rich or poor, they care how rich or poor their neihbors are in relation to them.

This path could eventually lead to revolution, either as the poor are left in third world status while the rich are as rich as any american or europeon....

however it keeps the country split, since the rich while more and more affluent wont' want to rock the boat for democracy since it lets in all the poorer people and hurts them economically.

China can get away with this at the moment because of how undeveloped a large portion of their economy/work-force is; but at the rate their economy is growing it really won’t be that long before finding individuals who are willing to do this labour at such low wages will become impossible, and they will be forced into a more equitable distribution of income.

Realistically, 50 years from now I expect people to talk about China and India as being two massive modern economies where the standard of living of most people is (somewhat) in line with the rest of the developed world; and the production of cheap crap will mostly be focused in undeveloped nations (Africa would be my expectation) or by robots.

Except most major programs like SS and Medicare won't be affected so we are going to be broke anyway even with a freeze.

@HappySquirrel. Look to Bangladesh for the next factory of the world I reckon. Africa is just too volatile.