Haven’t wrote about economic observations lately so here are some:

China has been in the news lately because of two related topics. They are slowly allowing their currency to appreciate and their workers are beginning to demand higher wages. With these two events gradually occurring, China is becoming less and less of a developing country; it is projected to be one of the world’s largest consumption country. Of course this all makes sense because major American companies are already trying to get a foot in with the Chinese (e.g. Apple).

That being said, in the next 20 years, China’s economic comparative advantage is no longer going to be cheap labor. With an appreciating currency and rising labor prices, the developed world is going to have to look for other sources of cheaper labor. My prediction for where everybody is going to find cheap labor is Africa. Most of Africa is considered the third world so labor prices are even cheaper prices there, than in China. Both parties would benefit; Africa is in desperate need of 21st century infrastructure (their bandwidth capacity was just doubled) and Global companies would be able to reduce their costs.

I do acknowledge that there are unforeseen costs in doing business in Africa, such as the added cost of the instability, but I do believe that the benefits will outweigh the costs. Investment in Africa should only theoretically increase stability and allow the continent to be developed if done the right way.