In the future, China will no longer be the "world's factory"?

Huajian, one of China's largest footwear exporters, plans to invest millions of dollars to expand its factory in Ethiopia, a sign that Chinese manufacturers are considering moving to Africa, according to the Wall Street Journal. to enjoy preferential tariffs and lower labor costs. As early as Chinese manufacturers moved factories, the world's major brand manufacturers have made many similar moves.

In 2012, internationally renowned brands such as Adidas and Nike closed their manufacturing enterprises in China, and the textile and garment industry in China moved to Vietnam, Myanmar, Cambodia, Bangladesh and other countries. The largest domestic foundry is also investing in Indonesia.

In December of the same year, Apple CEO Cook stated that "for technical reasons, we intend to transfer some of the product lines in China back to the United States." Prior to this, General Electric of the United States also announced that it would relocate some production lines from Mexico and China back to the United States. American manufacturing has begun to "return" from overseas.

In April of this year, the New York Times reported that due to the Chinese labor force There are shortages, wages are rising, and more and more foreign money is moving to Cambodia. Jewelry company Tiffany is building a diamond polishing factory in Cambodia; some giant Japanese manufacturers have also started to set up factories in Cambodia to produce auto parts, mobile phone touch screens and other components; European companies are following them, producing dance shoes in Cambodia and so on.

In May, the FT reported that British food producer Symington was planning to relocate its noodle production from Guangzhou back to Leeds, and that the maker of "Ragu" pasta sauce and "GoldenWonder" barrel noodles had cancelled contracts in China. This is mainly because wages in factories in China's Pearl River Delta region are rising by 10% to 20% every year.

The media believes that foreign companies are flocking to Cambodia for one simple reason: a desire to reduce their heavy reliance on Chinese factories. "The problems faced by foreign investors in China are rapidly increasing. Wages for blue-collar workers have skyrocketed, the workforce has shrunk since last year due to China's one-child policy, and the population is also facing an aging population."

On Platformization and Modularization The wave of globalization it has driven has been launched at a time when China has pushed ahead with economic reforms that have been the key to China's 30-year-old economic miracle. The cheap labor gradually released by the reform of the national organization and system since 1978. Especially the rural labor force released by the reform of the rural economic system, the assembly line management method formulated by Chinese enterprises according to the characteristics of this labor force quickly gained a competitive advantage.

According to statistics, the increase in the labor force accounted for about a quarter of the growth in per capita GDP between 1980 and 2010. Today, these companies are gradually losing the competitive advantage of the "demographic dividend". Compared with 10 years ago, the advantage of low labor cost in China has weakened significantly. Deutsche Bank pointed out in a research report that since 2001, the wages of Chinese workers have risen by about 200% in dollar terms. The increase exceeded that of Thailand and was close to that of the Philippines. But productivity has grown at the slowest pace in recent years. According to the data of the British Economist Intelligence Unit (EIU), labor costs in China have increased substantially by nearly four times over the past decade. The labor cost per hour increased from US$0.6 in 2000 to US$2.9 in 2011, which is equivalent to 1.5 times that of Thailand. , 2.5 times that of the Philippines, and 3.5 times that of Indonesia. The cost of resources represented by land has also risen sharply. At the end of 2011, the total level of land prices in major cities monitored nationwide was 3,049 yuan per square meter, 2.4 times that at the end of 2005.

From 2000 to 2005, Chinese workers' wages rose at an annual rate of 10 percent; from 2005 to 2010, the increase was as high as 19 percent annually, according to data from the Boston Consulting Group. The Chinese government has recently set a target of an average annual increase of more than 13% in the minimum wage by 2015. Meanwhile, wages for workers in developed countries have risen slowly. In the U.S. manufacturing sector, the real wages of workers have even fallen by 2.2% since 2005 due to the impact of the economic crisis. More reports pointed out that by 2015, the cost of China's manufacturing industry will be equal to that of the United States. The latest developments in the global steel industry also show that China's current steel production costs are close to those of the United States.

With the gradual disappearance of the "demographic dividend", the loss of cost advantages in some industries caused by the appreciation of the RMB is a reality that Chinese manufacturing companies have to face. As wage costs and production costs in China continue to rise, the competitiveness of ASEAN countries' manufacturing industries continues to increase, and more international capital flows to Southeast Asia. According to the World Investment Report 2012, FDI inflows to Southeast Asia in 2011 were US$117 billion, a 26 percent increase over the previous year, while China's growth rate was only 8 percent over the same period. The yuan has appreciated about 11 percent against the dollar since the end of 2008, pushing up labor costs in dollar terms. Although there are still areas with low wages in inland China, it is difficult to reduce costs by moving to the inland when considering transportation costs and business convenience. In 2000, 40% of the world's Nike shoes were produced in China, and only 13% were produced in Vietnam. In 2009, the output of both sides accounted for 36%. In 2010, Vietnam replaced China as the world's largest producer of Nike shoes.

It's not just that the wages of the labor force have skyrocketed, the vast majority of today's industrial workers are post-80s and post-90s, and their enthusiasm for manufacturing jobs is less than that of their parents. In addition to survival, the new generation of young people expect more from enterprises. While the growth of the labor force is slowing down, China's economic growth is also decelerating. Financial pressures on factory owners have been rising. Wages have been climbing at double-digit annual rates for the past three years. A stronger workforce has also spawned labor disputes.

Therefore, now, the voice of the "world factory" is gradually fading in China: on the one hand, the production of the lowest-end consumer goods is constantly shifting from China to regions with lower production factor costs - Southeast Asia, South America, and even Africa; On the one hand, some high value-added products, such as automobiles, electronic products, machinery manufacturing and other industries are also facing dual threats in China - capacity saturation or excess capacity. Over the years, China has relied on the huge consumer market in developed countries to develop an export-oriented manufacturing industry. However, following a series of economic crises in Europe and the United States in recent years, the export market has begun to shrink, and the prospects for resumption of growth are slim.

The development process of the previous "world factories" in the past, whether it is the United Kingdom, the United States, Japan, or the once highly developed manufacturing industries in Hong Kong and Taiwan, history always repeats itself again and again: all experience From the strong production capacity advantage to the structural adjustment process. Each emerging "world factory" may rely on different factors for the rise of the manufacturing industry, but the ultimate reason for the transfer of its own manufacturing industry is nothing more than the increase in the cost of various factors leading to the weakening of its own comparative advantage, and now it is China's turn.

Manufacturing analysts believe that not only is the international economic downturn the cause, but the development of China's manufacturing industry is also facing the challenge of transformation. "The low-cost production advantage of some domestic industries no longer exists. Either innovation or recession." Economist Sun Mingchun mentioned in his report on the Asian economy that there are preliminary signs that Southeast Asian countries are surpassing China as a low-cost country. The main source of cost manufacturing, its development momentum is likely to accelerate in the next few years, and China will lose its status as the "world's factory" in the next five to ten years. The report points out that over the past century, there has been an ongoing industrial transfer from developed Western countries to East Asia. In the past decade, Vietnam's export growth in labor-intensive industries such as textiles and clothing has been higher than China's, while Cambodia's export growth rate has also surpassed China's in the past two years.

In this regard, economist Zuo Xiaolei said that losing the status of "world factory" is actually a good thing for China, and China should also follow this historical law. Now that the advantages of low-cost factors have been lost, China must face up to these problems, carry out structural adjustment, and generate new structures and new comparative advantages.

Each economic crisis often breeds a new round of major scientific and technological revolutions, bringing about industrial restructuring and promoting the development of the manufacturing industry. China's manufacturing industry should take the crisis as an opportunity to integrate into the new round of global industrial revolution, realize the transformation and upgrading of the manufacturing industry, and enhance its competitiveness in the next round of growth. Before the labor cost reaches a high level, China must find an industry with a competitive advantage, and the trend of high labor cost is irreversible.

On the other hand, some critics argue that this estimate is overstated. Even if there is a phenomenon of "return" of manufacturing in developed countries such as the United States, China, as the world's largest manufacturing country, still has unique advantages. A number of senior Wall Street financial figures also stated at the "Wall Street Legend" international high-end series of forums that the advantages of Chinese manufacturing are still there, and the status of "world factory" will not be replaced. It is difficult for other developing countries to have the conditions to be the "world factory": First, it is difficult for a substitute to undertake such a large-scale transfer. Second, the continuous improvement of the quality of my country's labor force is becoming a new advantage in economic competition.

Mr. Pei Changhong, director of the China Institute of Social Sciences and Economics, claims that while China's labor costs have risen, resource costs have risen. However, the human resources in the United States are faulty, there is a shortage of middle-level skilled workers, and it is impossible for the manufacturing industry to return to the United States. At the same time, Southeast Asian countries have imperfect infrastructure and backward human skills. With the improvement of China's human skills and quality, it is possible that China's manufacturing industry will be worry-free for ten years, and no one can shake China's status as a world factory. After years of accumulation, China already has advantages in the integration of supply chain resources. China has the best supply chain for industrial components in the world, and its infrastructure conditions are undoubtedly much better than those of Southeast Asian countries with lower labor costs.

At present, some Chinese companies have begun to outsource some labor-intensive businesses to Southeast Asian countries to save labor costs. The construction of supply chain is a complex system engineering. For example, it not only requires abundant supply of raw materials and parts, but also requires the cooperation of machines and labor in the later production, in addition to an efficient distribution network and its maintenance system. The manufacturing industry of newly industrialized countries still has a certain distance from China in terms of the integrity of the supply chain.

China also has a lot of room for improvement in improving labor productivity. According to data from Japan's Nomura Securities, at present, the proportion of digital equipment in China is only 28%, compared with 83% in Japan. However, China's growth rate far exceeds that of Japan at the same stage of development. The automation revolution that China is currently advancing will greatly improve China's labor productivity. In terms of market proximity, China itself is a huge emerging economy market. Therefore, some analysts believe that the increase in labor costs alone will not prompt more companies to leave China.

One of the top ten public relations companies in the world, Ji Ruida, chairman of the Greater China region of Encore Consulting Co., Ltd., believes that only about 3-4% of American companies in China will move back to the United States. China has many advantages and the working population is very large. , the whole supply chain is very good, many American companies will continue to operate production in China.

Historical experience and economic theory both point out that China's loss of its status as the "world's factory" is not only a major disaster, but an inevitable process of historical development and China's modernization. Losing the status of "world factory" is not only an objective requirement of historical development and the theory of comparative advantage of market economy, but also a subjective wish of decision-makers and the industry.

No matter what period the "world's factory" or the developed manufacturing area has experienced the same story, development, prosperity, decline and transformation. What is certain is that every translocation of the "world factory" may represent the decline of the manufacturing industry, but it does not represent the recession of the economy and society, and it may be the arrival of another rapid development. History has also pointed out the way for China's manufacturing industry. In this case, China's original manufacturing model has come to the crossroads of transformation. Realize the transition of the economy from relying on the export of cheap products to a stable growth mode driven by domestic demand. Relying on scientific and technological innovation, reducing energy consumption, reducing environmental pollution, increasing employment, improving economic efficiency, and enhancing competitiveness, the "new manufacturing industry" that can achieve sustainable development has become a trend required by the international community and an important means of competition. .

However, based on the historical experience of countries that have successfully transitioned their economies, we are still not ready. From low-end manufacturing to high-end manufacturing, from manufacturing to service industry, from relying on the export of industrial products to driving growth through internal consumption, from developing new industries—cultural industry, sports industry, industrial and commercial service industry, legal service and consulting industry , marketing, advertising industries, etc., all require profound political, social, judicial, financial, sports, cultural system, distribution system and a series of institutional reforms.

A service-led, innovation-driven economy relies on a highly rule-of-law, democratic and clean government, and a highly transparent and open society. It is precisely because of this that some people believe that the serious lag and deep-rooted drawbacks of the ten-year institutional reform have become a stumbling block that seriously hinders China's economic transformation and sustained growth. The key to the successful transformation of the Chinese economy and the rediscovery of sustainable growth lies in reform.