By re-manufactured products sold to foreigners, China and the world economy to make themselves reborn. In 1990, China’s share of global manufacturing output in less than 3%, and now has close to 25%. Approximately 80% of the world’s air-conditioned, 70 percent of mobile phones and 60% of the shoes are made in China. Intense development of China’s manufacturing supply chain has generated deep in Southeast Asia. The “Factory Asia” is now nearly half of global manufacturing products.
China’s economic development has been chasing with the “Asian Tigers” pace. Many people estimate that China will at some point, “the baton” to the other countries, so that we paries manufacturing prosperity. However, this factor wages rose far enough to make China let go, on the contrary, China to “baton” tighter grip. And the loss of cheap labor from China a major shift jobs to Southeast Asia, to further consolidate the “Factory Asia” dominance. This gives those in emerging markets (such as India, Africa, South America, etc.) outside the Chinese influence in the region poses a problem: If you want to get rich become harder.
Earlier this month, the Chinese government announced in 2015 GDP target was 7%, which would be the lowest level in 20 years, China’s gross domestic product. Nevertheless, China’s manufacturing sector will remain the three super advantage, so that the entire economic benefit.
First, although China is also involved in the high-end market, develop high value-added industries, but it has always remained true to low-cost manufacturing in this area. In fact, China’s share of world exports of clothing accounted for 42.6 percent from 2011 to 2013 increased by 43.1%. Meanwhile, China has also mastered the more “Made in China” raw materials. The World Bank found that parts of China’s total imports of parts and components in the proportion has declined from the mid-1990s, 60% of the peak of the last century to around 35 percent today. One important reason for this phenomenon is far behind other countries, China has a group of highly efficient suppliers. In addition, China also has a first-class infrastructure and continuous improvement, China also plans in 2020, each year 10 new airports. Chinese companies are using automation to improve productivity, partially offset by the impact of rising wages due. This is the Chinese government recently proposed the idea of the strategy behind the “Made in China 2025.”
China’s second advantage is that the “Asian factory” itself. With wages rising, some low-cost operations are indeed leave China. Most of them are being transferred to the majority of low-income populations in Southeast Asia. This process has its dark side in. Last year, a non-governmental organization found that the presence of about 30% of workers were forced to labor in the electronics industry in Malaysia. However, with Samsung, Microsoft, Toyota and other multinational companies to cut production in China, turning places like Burma and the Philippines, one of Southeast Asia with China as the center of the regional supply chain have been consolidated.
The third advantage is that China is becoming a key part of the demand chain. As the spending power of Chinese consumers and improve taste, “Asian factories” are also more profitable marketing and customer service to obtain a greater share. At the same time, demand from the Chinese market significantly strengthen a series of Asian supply chain. Faced with the Chinese market, the region’s suppliers have an advantage over more distant competitors.
And relying on flexible policies, these advantages can play even more fully. ASEAN has the ability to gain an advantage in the low-end manufacturing. In calculating the amount, the proportion of China from 2009 to 87% to 79% last year, the share of imports in the footwear in the United States. Vietnam, Indonesia and Cambodia to fill the disappearance of the share. In fact, ASEAN can do even much more, it has the ability to establish a unified market is more high-end products and services. Regional trade and global trade, manufacturing system helps to spread from China to neighboring countries. Such as the automotive industry in Thailand removal of import restrictions on foreign components, the access to a good development, which indicates that the right decisions can help ASEAN countries to embed China’s manufacturing lines.
Unfortunately, the other emerging economies, not so much cause for optimism. They lack an integration can be used as the core area of the large economies. North American Free Trade Area agreement to help Mexican companies into the supply chain network in North America, and Central and South America failed to benefit. High trade barriers have resulted in Western Europe, Central and Eastern European countries that do not like to help guide and support the economic development of North Africa.
Even as India and sub-Saharan Africa to the south, as you can to win some manufacturing jobs from the “Asian factories” in the hands, but there is another problem: manufacturing jobs and wages may not create so much before. In the past, export-oriented manufacturing sector did not put a lot of technical expertise to shift from farm to factory workers, rapidly increasing the productivity of this population. Today, technological advances have save a lot of manpower. China and its neighboring countries may be the last batch of labor by hiring a large number of low-end production of cheap goods to achieve economies leaps and bounds.
For emerging markets, exports are still the safest path of development. Compete in the global market is the best way to improve productivity. However, the state “Factory Asia” outside the engine will have to rely on several development – not only in manufacturing, but also agriculture and services. Successful Indian IT services industry is one example, but this requires high-end technology, and use of the country’s rich human resources.
This development model is no longer rely solely on lowering labor costs, policy-makers put a higher demand. South American and African countries, the priority should be the establishment of a more liberalized global trade in services system. In addition to the construction of road infrastructure, ports beyond, but also focused on the fiber. Education is essential, because you want a country in the world to open up global markets will require skilled labor.
These terms are daunting task for developing countries. But wait Chinese wage inflation caused by the transfer of the manufacturing industry and the rich would be a failure “jewel.”