China’s Emergence as the ‘World’s Factory’

Abstract

No nation in the world can match China’s industrialization over the recent past. China is now considered as the world’s factory, in that the entire world’s manufactured products have a Chinese affiliation in one way or the other. However, China’s industrialization has presented intense problems which have resulted in, or have the potential to result in scarcity of natural and man-made resources, inability to innovate technologically, social imbalance, migration disparity, unemployment, and a shortage of food. Currently, the single most lethal challenge facing the world factory, and has the potential to spill over to other nations globally is the issue of pollution and environmental degradation.

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Main findings

China has received worldwide acclaim for the rapid industrialization that has been registered in that nation over the last 30 years. This industrialization has seen China ascend economically and politically, almost in the same way the United States rose after World War II. Today, China constitutes an integral part of the global supply, making up for one-third of the world’s supply. In 2007, the economic growth in China was phenomenal; in fact, it made up for one-third of the total world economic growth (CNN.com/Asia, 2008). China is a leader in the production of an extensive range of products including textiles, electronics, machinery, and telecommunication technology. The cash flow into the country is so high that in 2007, the Chinese government recorded a national stash of $1.5 trillion worth of foreign exchange reserves.

Most Chinese firms have failed to invest in the research and development of their products and markets. Furthermore, most have not made attempts to patents or copyright their products. This is unfortunate because they fail to maintain a competitive edge over their local and global competition. It is estimated that only one percent of total sales of most Chinese firms was invested in research and development, which is by far lower than the global average of five percent (China today, 2004).

The manufacture of goods in China is highly labor-intensive, coupled with simplifies processing and assembly processes. There is cheap and available in China because of the huge population, and this gives China its primary competitive advantage. Important to note that labor should not be the only competitive advantage of any given firm; there should be a continuous investment in product development and innovation. However, the labor market is highly criticized because workers are subjected to harsh conditions, often characterized by long and dangerous working conditions. There is a need for improved work conditions for the workers, whose hard work has put China on the global map. The challenge to the Chinese government is to move from being a mere supply chain but to evolve into a value provider. Moreover, the Chinese government should work towards a consumer economy as opposed to a producer economy. The long-run logic in this would be to the creation of conditions where the average Chinese enjoys macro-level benefits.

Because of its high production level, China’s consumption levels of raw materials can best be described as ravenous. China is the leading importer of raw materials, including steel, iron ore, zinc, aluminum, tin, and nickel. It is also the world’s largest consumer of coal, grain, refrigerators, television sets, mobile phones, and fertilizers. Due to the extensive industrialization, it is projected that the next decade will see China alone build over half of the world’s new buildings, mostly to accommodate the factories.

The Chinese appetite for raw materials is so acute that when 2004 saw a sharp shortage of scrap metal within its soil, every country in the world recorded an uncharacteristically high theft in manholes! Its consumption levels are so high that they have been central to the sharp increased in the cost of doing business and the international commodity prices the world over. This high demand has resulted in an unprecedented rise in the cost of shipping. Interestingly, the huge Chinese population projected to grow sevenfold by 2020 from the current number of 1.3 billion, has rapidly embraced consumerism, probably because of Western influences. The Chinese are not merely consumers, they are flamboyant too. Recent years have seen luxury cars such as the Ferrari, Porsche, and Maserati record booming sales in China (Leslie, 2007).

The global financial crunch was largely expected to affect the Chinese exports in that the tightening of budgets as global prices increased while the wages remained the same meant that consumers would cut down their consumption. China’s real GDP growth in 2007 was marked at 11.4%. However, it was projected that the decline of exports, especially to the US would result in a decreased GDP rate by 1.6 percent (China Stakes, 2008). The global financial crunch and the resultant tightening of credit by overseeing banks have had a direct impact on the world’s factories. The reduction of demand by the US market meant that there was a decline in exports. The early stages of 2008 saw China’s exports decline for the first time in well over three years (CNN.com/Asia). This affected the small and medium enterprises as their risk was less spread. Furthermore, the poor investment in research and product development would result in an overproduction crisis. As China is indeed the world factory, the slowdown in China’s exports affected countries across the globe because China imports raw materials from many quarters. In 2008, the value of raw material imports was $1 trillion, amounting to over half of the total import value.

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However, China has refuted claims that the financial crunch affected them as adversely as the rest of the world, particularly, the US. A factory owner in Dongguan, Mr. Chan, suggests that business has been relatively steady in the first ten months of 2008. Dongguan is known throughout China as the “world’s factory” because it has over 28, 000 industrial firms, which includes 15, 000 overseas enterprises engaged in clothes, footwear, and IT products production. Unfortunately, the smaller companies in the region have suffered and closed down, which has benefited Mr. Chan because not only has competition be cut off but also he has been able to get skilled laborers who have been downsized from the affected companies. He projects that he is likely to be affected in the early stages of 2009. Consequently, the Chinese company intends to cut production costs by increased production efficiency and higher energy conservation efforts (Zibb, November 2008).

China is recognized globally for its position as the world’s manufacturing powerhouse. Unfortunately, manufactured products are not the only things that are exploding from China; environmental pollutants are also recording record high levels. It is a fact that China is the world’s biggest polluter of the environment; in fact, China produces more pollution than the United States, Europe and India combined. The greatest pollution producer in China is coal and is the principal source of energy. Coal is the main energy source because it is locally available. However, the recent demand for manufactured products is skyrocketing that the demand for Sudanese oil and Australian iron as raw materials is on the rise.

China’s participation in unprecedented ecological destruction can be dated back to the Mao era, which saw massive ecological destruction. However, this pales in comparison to the present ecological destruction in and by China. China’s pollution woes can largely be traced back to its western counterparts, which have been instrumental in funding the industrialization process of China. For example, in 2007, US-based venture capitalists invested a whopping $1.4 billion to companies of Chinese origin. They also sought to have young professionals extensively trained in companies such as the Google, Yahoo, and Microsoft Beijing outposts (Wired Magazine, 2008). The Chinese failed to realize the main objective behind the west’s generosity; to shift the extents of pollution far away from home. China is currently caught between a rock and hard place because they cannot go back on their agreement, yet, the current pollution levels in their country have reached toxic levels.

So extensive is the destruction of the environment that over forests have disappeared by three-fourths of their previous state, resulting in the desertification of China. The large industrial base in China requires excessive use of underground water reserves and this has resulted in land depression in over 95 towns in China. As a result of this, over $12 billion in economic losses have been recorded in the city of Shanghai alone. China has also seen an increase in the number of deaths due to accidents and fires in the coal mines. The fires have seen 200 million tons of coal go to waste and this has caused significant effects on global warming. So severe is this situation that 16 of the world’s 20 most populated cities are in China. These cities are characterized by a hovering dense cloud of mercury, lead, sulfur dioxide among other highly toxic elements (Leslie, 2007).

Due to the high industrialization pressure, there is high demand for electricity that is produced cost-effectively from coal. In 2005, China caused pollution, particularly from sulfur dioxide, totaling 25.5 million tonnes. This acid rain is the order of the day in China. This acid rain destroyed China’s landmasses, water, and consequently, food. Unfortunately, this rain affects nations across the globe because of its volume. This situation is further aggravated by the fact that there are no government regulations set to curb excess pollution. There are very strict censorship and media control measures set by the government. The objective of this action is to ensure that no negative information, particularly concerning the environmental degradation in China, leaks to the international community. For example, information about the deplorable pollution that has increased acid rain, which has reduced soil productivity by 33%, is tightly kept secret. This secrecy further clarifies that they are aware of the challenges they are presenting to the global environment as a whole. Unfortunately, no proactive measures are being taken to contain the situation the last 30 years have seen a dramatic increase in coal consumption by up to five times, with no corrective measures being enacted to contain the SO2 situation (Sud, 2006).

The number of deaths as a result of respiratory-related illnesses alone is at 400, 000 persons per year. Furthermore, the healthcare costs for air pollution-related illnesses eat up an estimated 4% of the total GDP. Fish in China are rare; not because there are no water bodies but because the water bodies are too polluted to be inhabited by fish. A good proportion of the population consumes highly contained water. The government is responsible for allowing the wanton waste of untreated sewage waste into the Yangtze, China’s longest river. The world’s most dangerous natural feature is not some highly volcanic mountain somewhere in the world; the most dangerous volcanic natural feature is the Yellow River in China, which is renowned for its cataclysmic floods. It is alarming to note that this river flow and is a hazard to human and plant life in China and beyond. China, as expected, is the world’s largest producer of garbage, which is untreated and it is a constitution of a third of the total garbage in the world. Due to the entrepreneurial nature of the Chinese, over half of the world’s discarded computers find their way into China, where whatever can be reused or repaired is extracted before the officially useless parts are discarded haphazardly (Leslie, 2007).

Conclusion

There is no doubt that China is the world’s factory and trade and manufacturing powerhouse. Because of this status, loads of capital and thousands of new companies are emerging daily (China Daily, 2004). However, this is at the expense of the rest of the world because the consequences of the present Chinese “world factory status” are as grandiose as its economic growth. If left uncorrected, the current environmental devastation trend by China will not only result in the sudden destruction of the Chinese economy but also result in irreversible destruction of ecosystems and societies the world over. According to “The process and problems of industrialization and urbanization in China: The status of the tenth five-year plan and recommendations for the eleventh five-year plan”, the time to set corrective measures in place is now, or else, China will reverse all its progress in a matter of days.

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References

  1. China Daily (2004). “Experts: China, more than a world factory” Web.
  2. Zibb (2008). “China Focus: “World’s factory” confident of tackling global financial crisis”
  3. Zheng, Lu, Qunhui, Huang, Lu Tie, and Zhou Weifu (2007). “The process and problems of industrialization and urbanization in China: The status of the tenth five-year plan and recommendations for the eleventh five-year plan”. Chinese economy, vol. 40, issue 1.
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StudyCorgi. (2021, October 15). China’s Emergence as the ‘World’s Factory’. Retrieved from https://studycorgi.com/chinas-emergence-as-the-worlds-factory/

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"China’s Emergence as the ‘World’s Factory’." StudyCorgi, 15 Oct. 2021, studycorgi.com/chinas-emergence-as-the-worlds-factory/.

1. StudyCorgi. "China’s Emergence as the ‘World’s Factory’." October 15, 2021. https://studycorgi.com/chinas-emergence-as-the-worlds-factory/.


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StudyCorgi. "China’s Emergence as the ‘World’s Factory’." October 15, 2021. https://studycorgi.com/chinas-emergence-as-the-worlds-factory/.

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StudyCorgi. 2021. "China’s Emergence as the ‘World’s Factory’." October 15, 2021. https://studycorgi.com/chinas-emergence-as-the-worlds-factory/.

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StudyCorgi. (2021) 'China’s Emergence as the ‘World’s Factory’'. 15 October.

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