Economic changes and government policies are driving millions of China’s migrant workers away from the wealthy coastal regions back to the less developed western regions. The trend is a clear sign that a fundamental change to China’s economy is in progress, as a growth model that lifted more than half a billion people out of poverty starts to slow. From the early 1990s onwards, China’s double-digit GDP growth was fueled largely by the cheap labor provided by people leaving their farms in China’s poorer inland provinces to find work in the factories springing up along the coast. Now this has changed.
For decades, China has been a top destination for foreign firms to move their operations abroad, now the trend is reversing—Chinese firms, especially manufacturers, are now moving to the US, not only to lower the cost of production but also to build their brands in global market. Indeed, China is losing its old advantage of cheap labor and raw material, and in certain parts of the US, the land is much cheaper than in China. Meanwhile, the re-booming US economy, flexible financial system and beneficiary tax policies are also driving ambitious Chinese entrepreneurs, who are changing the “Made in China” to “Made in the US”.
Under the banner industrial policy “Made in China 2025”, China seeks to replace the advanced foreign manufactured goods that it has long relied upon with domestically-produced goods. But the effort is spooking the foreign business community, and the plan may not address China’s most genuine needs. Precise details of the implementation of the grand policy are only now beginning to emerge. For Chinese companies, the real long-term impact of the plan is at best unclear. But for foreign companies, although there will be business opportunities in the short-term, the plan as a whole presents big challenges to their future in China.
China’s industrial economy did not stabilize: it declined in the first quarter of 2016, according to the latest CKGSB survey of over 2,000 industrial firms nationwide. The survey, led by CKGSB Professor of Finance Gan Jie, shows that overcapacity and weak demand remain biggest challenges for China’s industrial economy. The Business Sentiment Index, a major indicator of the survey, stood at 46 in Q1 2016, a one point increase from Q4 2015, but still indicative of contraction. The BSI is the simple average of three diffusion indices including current operating conditions, expected change in operating conditions and investment timing.
As China’s economy matures, the leaders are trying to move manufacturing up the value chain with the Made in China 2025 plan.
CKGSB’s Business Sentiment Index shows that China’s industrial economy hasn’t improved over the last quarter. Rather it has contracted slightly.
Alan Krueger, former Chairman of the White House Council of Economic Advisors, shares his thoughts on the labor market, US economic recovery and the interplay with China.
With the Made in China 2025 plan, the government is trying to give the manufacturing sector a major boost. A look at the sectors that will get a fillip.
A quick guide to some of the hottest topics that came up during the 2015 Lianghui, the two annual meetings that set the agenda for the Chinese economy.
This week, Qualcomm got a rap on its knuckles and a $975 million fine; Alibaba invested in smartphone brand Meizu; and the Chinese imports figure plunged. Bad Data The most recent indicators of the Chinese economy don’t look good. Imports fell sharply by 20% in January from a year earlier, the biggest drop since May […]