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Special> Boao Forum for Asia 2014> Archive
UPDATED: April 15, 2013 NO. 16 APRIL 18, 2013
Praise and Concern at Boao
China's plans for further economic development and reform were highly lauded, but its challenges were not overlooked
By Zhou Xiaoyan

A GLOBAL EVENT: The opening ceremony of the 2013 Boao Forum for Asia kicks off on April 7, attracting worldwide attention (GUO CHENG)

Manufacturing hollowing-out?

Over the past several years, some China-based manufacturers have shifted production to regions with cheaper labor and land costs, like Southeast Asia. Meanwhile, developed countries like the United States have called on their companies to bring manufacturing jobs back home. As a result, concerns are rampant over the hollowing-out of China's manufacturing sector.

In the eyes of Justin Yifu Lin, former World Bank chief economist, industrial transfer is a common phenomenon.

In the 1960s when Japan was in the midst of its economic ascent, the Japanese moved labor-intensive industries to the four Asian Tigers—Singapore, South Korea, Taiwan and Hong Kong—and helped them realize industrialization. In the 1980s, the "tigers" followed suit and moved industries to the Chinese mainland. Now, it is China's turn, Lin said.

Dong Mingzhu, Board Chairman of Gree Electric Appliances, Inc. of Zhuhai, said that the fundamental reason for the hollowing-out of the manufacturing sector is a lack of core technology.

"Companies that were hit most from the 2008 financial crisis were original equipment manufacturers. They don't have a brand, or any key technology in what they produce. When those companies were built in the first place, their founders were too short-sighted to make any long-term plans," said Dong, during a roundtable on the hollowing-out of China's manufacturing sector.

"As long as you have core technology, you'll be fine," she said, noting that Gree is now Brazil's largest air conditioner producer after founding a factory using refined technology 10 years ago.

Lin Zuoming, Board Chairman of Aviation Industry Corp., agreed.

"Economic globalization itself is a process whereby industrial chains break into fragments and are scattered in different regions," said Lin.

"Some lower-end manufacturing businesses transferring out of China is a positive change, as long as we keep higher-end manufacturing businesses and their core technologies."

Hu Zhenyu, Vice President of the China Fortune Land Development Co. Ltd., an expert in investment and the operation of industrial parks in China, said that local governments are quite cautious and rational when selecting which industries to develop. Lower value-added industries are not welcome in most regions, he said.

"As the resources in coastal regions are more and more scarce, it's totally understandable that some industries will shift to China's inland regions, or even to other countries. Doing so can prepare the way for industrial upgrade along the coast," he said.

The upgrading process could bring massive layoffs.

"That's when the government should step up and re-educate workers for their next employment opportunities," he said.

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