Executive Summary:

 

The Prompted by fast-rising wages, the graduation of China from labor-intensive manufacturing has opened up a golden window of opportunity for the other low-wage Southern countries to kick-start industrialization by attracting Chinese labor-intensive light manufacturing sectors. In this paper, we aim to diagnose challenges faced by Southern countries to seize the opportunity presented by Chinese industrial transfers to kick-start and speed up their industrialization process. We will then draw on China's development experiences to propose concrete policy recommendations on how to use special economic zones and triangular cooperation to better seize the opportunity from the perspective of new structural economics. To successfully take advantage of this window of opportunity, host Southern countries need to resolve the following trilemma: (a) global buyers lack confidence in them to deliver high-quality goods on time; (b) Chinese labor-intensive manufacturers tend to be highly risk-averse when venturing into those uncharted investment destinations; and (c) low-wage Southern countries suffer from inadequate infrastructure and poor business environments. Drawing on development experiences of China from the perspective of new structural economics, this paper proposes to use the establishment of industrial parks as key leverage to turn the trilemma into triple wins among all the stakeholders and forge triangular cooperation. After reviewing the current state of industrial relocation, promising practical cases and the potential of industrial relocation from China, we propose concrete policy recommendations to help policymakers in partner Southern countries to better seize this great opportunity of industrialization enabled by China's industrial relocation.

 

In the midst of the Covid-19 pandemic, it is difficult to shy away from the damaging impacts that the pandemic is having on the world economy, global value chains and millions of lives around the world. Nonetheless, it is a matter of time before the pandemic will be kept under control and the collective efforts of the global community will help to combat it. The trend of international industrial transfers is irreversible and this crisis may even help to accelerate this process in the post-Covid-19 era, since multinational manufacturers are increasingly looking into diversifying the production bases as a shock absorber. While challenging, dynamic growth and economic structural transformation in Africa may finally be set in motion.

 

The authors:

Wen Chen (谌文), Research Fellow at the Institute of New Structural Economics, Peking University

Jiajun Xu (徐佳君), Executive Deputy Dean and Assistant Professor at the Institute of New Structural Economics, Peking University

Jia Yu (于佳), Director of International Development Cooperation Department, Senior Operations Officer

 

Link to the report: https://www.ssc-globalthinkers.org/index.php/topic/trilemma-triple-wins-creating-synergies-among-chinese-labour-intensive-manufacturers-global