If China is no longer the world’s factory, what will replace it? — Quartz

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Fashion reporter

The process of China's transformation into a world manufacturing power is remarkable. When it joined the World Trade Organization (WTO) in 2001, it played a minor role in the global manufacturing arena. However, after years of economic reforms around the production of goods for export, it officially joined the WTO to help its output soar. In the years since, it has provided itself

, To produce labor-intensive products such as textiles, toys, clothes, shoes and furniture for global companies and end consumers.

These industries are a springboard to enable China to develop economically and enter the production of more advanced products such as electronic products, just as it did for economies such as Hong Kong and South Korea. As education and wages rise and its cost advantage shrinks, China now hopes

, Relying on domestic consumption

, And leave the sales of cheap, labor-intensive goods to others.

But if its plan works, who will step in to replace China as the world's factory?

This is a question recently raised by Gordon Hanson, professor of economics at Harvard Kennedy School

National Bureau of Economic Research. There is no clear answer yet. After reviewing the candidates most qualified to replace China, and researching whether China itself can maintain this role (despite some important changes), he reiterated how confusing this issue is. He admitted: "Who will fill the shoes of China is still confusing."

China seems to have become a producer of labor-intensive products. Hansen focused his analysis on 10 products, including textiles, clothing, footwear, sporting goods, scooters, toys, and fixtures used in the sanitation, heating and lighting sectors. He found that China’s share of global exports of these products reached the highest level of 39.3% in 2013 and dropped to 31.6% in 2018. He pointed out that given the slowdown in growth and other factors, this form of manufacturing is unlikely to rise again. The proportion of China's labor force and the rising rate of university education.

The most obvious competitors to fill this vacancy may be the emerging export economies of Asia, namely India, Bangladesh, Cambodia, Indonesia, Myanmar, Pakistan, Sri Lanka and Vietnam. But in the past two decades, only Bangladesh, Cambodia and Vietnam have seen significant increases in their share of global labor-intensive exports. Bangladesh has grown into the world's second largest garment exporter

, And Vietnam has become China’s favorite alternative

with

.

Hansen said: "Bangladesh and Vietnam have the fastest growth." "If you have to say who is the next China, it is them. The problem is that they are not large enough to completely replace production like China did from East Asia in the 1990s. "Their total population is about 260 million, which is less than 20% of China's 1.4 billion population, and considering economic productivity, they are further shrinking in countries other than China. According to Hansen’s analysis, in Cambodia, they account for less than 8% of global labor-intensive exports.

For candidates from Europe, North Africa and the Middle East, such as Romania, Poland, Morocco, Tunisia and Turkey, the case is no longer attractive. Turkey, the group's largest exporter, has not significantly increased its share of labor-intensive exports for many years.

Labor-intensive manufacturing may stay in China, but huge changes will occur. Technology, especially automation, provides hope for robots to complete heavy tasks, while humans focus on more skilled pursuits. In fact, China is one of the world leaders in the use of industrial robots. But its adoption is mainly in the fields of automobiles and electronics. It has not shown much momentum in using this technology to produce low-cost goods, perhaps because it still provides a lot of cheap labor.

The technology itself has its limitations. Soft soft materials (such as fabrics) may be difficult to handle by robots, thus completing tasks such as putting shoelaces into sports shoes

. Although some companies

, Automation cannot immediately change the way of producing a large number of labor-intensive products.

Hansen thinks there is another possibility. China's development is uneven, and most labor-intensive manufacturing industries are concentrated in large cities. The industry may spread to other parts of the country. Hansen wrote: "In this case, China will eventually replace itself." A similar development occurred in the United States after World War II, when the manufacturing industry moved from more traditional urban centers due to the spread of interstate highways. To small cities across the country.

However, in China, companies are not in a hurry to move from coastal hubs to inland cities on a large scale, where the lack of industrial infrastructure may inhibit their productivity. The Chinese government’s efforts to encourage manufacturers to move to these regions have had limited success. Hansen wrote: "It can be proved from an economic perspective that China may be on the verge of a major change in the spatial distribution of its manufacturing industry, but evidence that this is actually happening is "hard to find."

Despite the active efforts of supply chain leaders

And fashion companies exploring

In Europe and America, many people still find it difficult and expensive to leave China. The manufacturing infrastructure is still unparalleled,

. It caused "

The strategy is that the company keeps most of its manufacturing operations in China, but distributes some of its shares to countries such as Vietnam.

But if China's costs continue to rise, and the company does not leave, what will happen?

Hansen’s paper did not address the consequences, but he said that one of the impacts may be the increase in the cost of clothing and footwear products, which is true for companies and even consumers. He said: “We are used to setting the prices of these goods very low, and I don’t know if we fully understand how much the prices of these goods have fallen relative to other goods in the past 20 years.” “Fast fashion is the rise of China. the result of."

The company may also continue to try its procurement. Hansen said: "We view innovation as creating new products or new methods of production, but changing the location where products are produced is another form of innovation." "This is new. There are risks. You are not sure how all parts are combined. Together. The experimental process to solve the problem may take a while."

Although it usually takes a while to figure out the new paradigm, once it does, it usually takes over quickly. This is typical

Used to describe innovative communication methods. It may not be clear who or where the next China will be, but this does not mean that the answer will never appear. At that time, the industry will respond. After all, this is how China changed from a small manufacturer to a world factory in such a short period of time.

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