it's probably mathematically impossible for that to happen, though.

China's cost advantage rests on one thing: its labor is *so* cheap that it makes economic sense to build things there, despite the increased shipping and other logistical costs -- like having to manage a multilingual, multicultural, multi-measuring-system, multi-legal-system manufacturing process.

Let's say shipping accounts for 30% of the wholesale cost of a good. That means Chinese wages only have to reach 70% of ours in order for their cost advantage to disappear.

Can China hold down labor costs? It'd be hard. All that money pouring into the country is entering the Chinese economy and getting spent on stuff. Living standards are going to rise, whether the government wants them to or not -- and, in fact, it wants them to. Otherwise, what would be the point of engaging in trade pacts?

Moreover, labor costs are only part of the issue. As standards of living rise, so do expectations. For example, China became an industrial giant, in part, by wreaking enormous environmental destruction. As people become more affluent, the environment becomes more important to them -- they no longer wish to breath smog and drink sewage. They require more environmental regulations for industry and power plants. So producing further growth becomes more expensive, adding to per-unit costs.

I don't know where the break-even point is, but in the end their standard of living won't rise as much as you might think, and ours won't fall as much as you might think.

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