Absolutely. China is a land of contradictions. You're also correct about Wall Street's version of China. Before manufacturing went full throttle in China with all of our nick knacks, textiles (on the way out of China and onward to cheaper places as we speak), and other goods, I remember that many things from China were of great quality and the products usually were related to Chinese heritage. I remember going to Gump's in SF as a child and I was always impressed by the Chinese dolls and art that they featured.
Two more side-notes related to the above: The Chinese have a plan. The communist party knows that they have to deal with internal matters to prevent any uprisings. Environmental issues are being tackled and they know that even losing sizable portions of international manufacturing business to lower cost other Pacific nations is something they can absorb because long-term they want to create a more balanced economy that has consumer spending at a much higher rate of overall GDP. Their answer is that with a billion people, they can have a self-sustaining model of internal manufacturing and consumer spending. That might sound odd to people in a country where 70% of GDP is consumer spending and nearly all everyday purchases from clothes and toys are imports, but it can be done. China with it's manufacturing might has the ability to pick and choose its trade barriers and tariffs to protect itself enough internally to prevent a consumer economy that then looks elsewhere to even lower manufacturing costs.
I had a conversation the other day with an associate who was wondering why our company has been under cost pressure on the wholesale end for the past few years even though there had been a glut of product and the raw goods prices had actually fallen in this area. Quite simply, it's about exactly as what you're saying, a rising middle class. A series of minimum wage hikes that will be continuing and it's being passed along from those manufacturers as they work to build the Chinese consumer economy. Back in the States, due to the ruthlessness of how corporate America works today and the dog eat dog nature, we have to essentially eat these per unit pricing increases because if you move product numbers outside of the range that the the small and medium sized business killing mammoth corporations have, you can't play ball. By doing so, our bottom line is hit and that's less profits that can go around to our team, which in-turn is another loss of useful disposable income that our GDP needs in order to grow. When upwards of 3/4 of your country's economic growth is predicated upon goods being bought (and much of those being imports), it's not a spectacular long-term vision.
