Once, the thought of strikes in China would have been laughable. Not only because the People's Republic is a communist country — with its emphasis on workers' rights and the authoritarian political system — but because China was thought to have an inexhaustible supply of labor that would prevent workers from putting a floor on wages. Yet in recent weeks, China has experienced a wave of labor unrest. Workers have gone out on strike, shutting down factories and demanding — and winning — wage increases. This new economic reality has profound implications for China and its competitors.

With a population of 1.3 billion, it was assumed China would enjoy an endless supply of workers who would keep factories humming, fueling a relentless export machine and ensuring that China dominated low-cost manufacturing. In the past two decades, China has increased its share of the value added of global manufacturing from 2 percent to 18 percent, making it one of, if not the, world's largest exporter.

For more than a year, however, there have been signs that this assumption was wrong. Companies in southern China, long the motor of the mighty export machine, have found it harder to find and keep workers. Part of the blame falls on the "one child" policy, which has cut the number of young workers. According to one estimate, the number of 15- to 24-year-olds in China will fall by one-third, from 225 million today to 150 million in 2022.