Industrial Transfer and the Remaking of the People's Republic of China's Competitive Advantage

Abstract

The recent economic slowdown in the People’s Republic of China (PRC) has triggered fear and even panic among global investors. In particular, observers are worried that manufacturing—the engine of the PRC’s hypergrowth over the past decades—has hit the doldrums. This article shows that low-end, labor-intensive export manufacturers on the coast have indeed been hit by rising costs and tougher local state regulations. However, it goes further to stress that some coastal manufacturers have begun relocating into, and investing in, the inland provinces of the PRC to take advantage of lower costs and policy concessions. By 2015, the value of domestic investment in five central provinces alone was 2.5 times that of foreign investment in the PRC. This phenomenon of industrial transfer, which began in the 2000s, plays a critical role in sparking economic growth in the interior regions, in economic restructuring on the coast, and in the remaking of the PRC’s national competitive advantage.