“In so doing, the country’s economic growth pattern and in fact, the scientific and technological industry’s progress has changed drastically,†he said. “The country is also aggressively promoting low-carbon development and energy conservation, which will facilitate, as well as spur rapid economic growth inthe country,†he added.
Cultivating talent
To meet the challenge of shortage of skilled expertise needed for China’s development, the Chinese government has put cultivating talent as a key priority. The government has issued a Medium and Long-term Talent Development Plan, which sets a blueprint for creating a highly skilled national work force inthe next 10 years.
The manufacturing sector, for instance, is facing migrant worker shortage woes as the sector grapples with a shrinking pool of low-cost labour and increasing bargaining power of the existing workers.
Disruption at foreign manufacturers, including Japanese automakers and Taiwan electronics company Foxconn Technology Group, reflect pressure for higher pay in China, exacerbated by thisshrinking pool of low-cost labour.
Referring to the recent Foshan Toyota strike, Cai says this resulted in more than the closure of the Toyota plant as the industrial action had created a chain reaction, ultimately impacting the air cargo sector. Pay increases will accelerate, posing greatest risk to manufacturers that rely on cheap labour and have limited pricing power, Credit Suisse Group AG analysts have warned. Many Chinese cities increased minimum wages this year by about 15-20 per cent from 2009, they said.
In addition, Cai says, other challenges to China’s air cargo industry include environmental events such as China’s natural disasters including earthquakes and floods, the El Nino phenomenon and the Icelandic volcanic ash disruption to the aviation industry, which were all becoming more frequent.
Renminbi appreciation
Cai also noted that the Euro zone debt had led to the delay of the renminbi appreciation as the government put off the currency’s revaluation timetable to a later date until the Euro zone debt issue was stabilised.
But Chinese authorities subsequently said on 19 June they would push ahead with the renminbi exchange rate mechanism reform, a move that is expected to loosen the currency’s two year old peg to the US dollar and lead toits gradual appreciation.
Cai says the renminbi appreciation will increase China’s imports but also accelerate investment and the relocation of manufacturing industries out of China.
Macroeconomic impact
Regarding the macroeconomic impact on China’s air cargo, Cai says there was increased demand for export air cargo and this in turn enhanced the input of technical content into the supply chain to shorten the product’s life cycle. He cites the ongoing demand for air capacity by products such as Apple’s iPad which is set out to take up thousands of tonnes of cargo space. In just 2.5 months of sales in the US, consumers snapped up more than 3 million units.
He says that to meet order fulfillment goals, products had to go by air rather than by sea to meet rapid market place changes, such as labour shortages and the renminbi appreciation.
He points out that China’s rapid domestic demand growth and regional industrial development had brought a fast rise in domestic freight growth.
On rising import cargo demand, Cai says the rapid renminbi appreciation and the increasing middle class will bring about a proportionate rise in luxury goods imports.
As the domestic production, technological transformation and productivity needed further development, more companies will import machinery and equipment, electronic components, as well as key raw material into China, he added.
Cai said most of US President Obama’s National Export Initiative (NEI) goal of doubling exports over the next five years to support two million jobs in America would be enabled by growth in China’sdomestic consumption.