Long future ahead for manufacturing industries

By Luo Zhenyu
0 CommentsPrint E-mail Global Times, July 13, 2010
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Two dark clouds are currently shadowing Chinese exports: wage increases and the floating of the yuan. And given the bigger context, the overall aims of upgrading industry and stimulating domestic demand also seem to question the value of the idea of "Made in China."

Is it still necessary to continue such sweaty and hard work if there's no profit in it? And shouldn't we rely on ourselves if the Western markets keep fluctuating so wildly?

Under such circumstances, the idea of "Made in China," an integral part of the Chinese economy during the past 30 years, seems to be losing support. Some people are predicting that 2010 will be a threshold year, and that the golden decade of Chinese exports is officially over.

But it's an easy and common mistake to judge an important social trend by only looking at one point while neglecting others.

The pessimistic view of the value of "Made in China" is that the only advantage the country has is low wages, but this is fundamentally mistaken. If low wages are China's only selling point, why aren't India and Africa, with even lower wages, also world factories?

China has two unique and overlooked advantages in the manufacturing industry.

The first is its large population and enormous strategic depth. After World War II, the global manufacturing center transferred from the US to Japan, then to the four Asian tigers of Singapore, Hong Kong, Taiwan, and South Korea, and finally landed in the Chinese mainland.

It seems to be a fixed law that manufacturing gradually becomes unprofitable as the economy develops and wages increase, and that it's only a development phase which is eventually passed by.

However, when it comes to China, the law of 50 years needs to be re-written. No other country can provide a mature labor force of 400 million people, nor produce more than 3 million engineers a year, nor achieve the prosperity of both a thriving export industry and a strong domestic market.

China's strategic depth also means that it can have different stages of social development existing side by side within its borders. The 1.3 billion people gives enough room for different stages of modernization.

Perhaps the cross-border manufacturing transfer which we have seen between countries and regions in the past 50 years will only happen within the borders of China. The transfer of Foxconn from Shenzhen to Langfang in Hebei Province is the latest example. As one official said, "Someone just has to do the job."

The second advantage is the unique cultural pattern of China, which cannot be copied by other countries.

In recent years, some shoe and garment companies have moved their factories from China to Southeast Asian countries for the sake of wage differences. In a very short time, they found the development of their enterprises was largely constrained by poor infrastructure and supporting facilities.

More importantly, they were surprised to find the workers there lacked the knowl-edge, discipline, working spirit and learning abilities that the Chinese have. Even those in China's neighboring countries were no exception. What they were lacking can generally be called "industrial spirit," which is deeply embedded in social history and forged over a long period of time. This is definitely not as simple as a figure adjustment on pay slips.

Industrial upgrading does not imply the abandonment of "Made in China," and stimulating domestic demand does not mean closed-door development.

In the past decade, the mechanisms of the WTO released the capabilities of Chinese manufacturing to every market of the world.

In the next 30 years, we will see a more ambitious vision. China will accomplish a historic transfer from "the world's factory" to "the world manufacturing center," abided by industrial upgrading and the stimulation of domestic demand.

The author is a senior economic commentator. forum@ globaltimes.com.cn

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