Is the world’s factory ‘hollowing out’ as manufacturers pack up and leave China?
Concerns raised as increasing tax and labour costs prompt Chinese producers to move business offshore
Fears are being raised of a “hollowing out” in China, formerly thought of as the world’s factory, after a mainland tycoon explained his rationale to set up factories in the United States and Foxconn, the world’s largest contract electronics manufacturer, also suggested it might move some operations across the Pacific.
“Hollowing out” refers to the deterioration of a country’s manufacturing sector when producers move to low-cost facilities overseas. Some economists believe the world’s leading developed economies are being hollowed out, threatening full employment in those locales.
Since China’s opening up in the 1980s and ’90s, and particularly so since it joined the World Trade Organisation in 2001, China has been a key destination for manufacturing to relocate from advanced economies, in the process making it the world’s second-largest economy.
Academics and Chinese workers have sensed a sea change in this situation after US president-elect Donald Trump began urging – and even bullying – American businesses to bring jobs back to the US at a time when China’s tax and regulatory regimes are becoming hostile to private manufacturers.
The central government has also encouraged many labour-intensive businesses to move elsewhere as it tries to steer the economy towards higher value-added services and high technology.