China is currently the largest manufacturing economy in the world. Its growth is mainly attributed to the country’s ability to position itself as a global hub for business activities. In 2010, around 19.8% of the total manufacturing output in the world came from China (Dempsey 2012). Major industries in this economy include those in mining and ore processing, automobile, telecommunication, and information technology sectors (Deng 2009). The government has adopted various policies to encourage industrial growth. The policies touch on inflation control, affordable labour, and mass production. All these are optimum conditions for manufacturers.
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Ability of China to Maintain the Lead
Economists predict a constant growth in industrial investment in this country. However, in recent times, China has become less attractive to investors, especially in the basic manufacturing sector. The development is brought about by different factors, such as rising wages and operational costs (Deng 2009). A critical look into the country’s manufacturing sector reveals some of the critical strategic mistakes that led to fast but unsustainable economic growth.
In the past, China was able to attract investors due to its ability to provide cheap labour. However, the country is fast losing this advantage (Dempsey 2012). It is mainly as a result of increased urbanisation. As such, the workforce is gaining higher expectations in terms of wages and working conditions (Dempsey 2012). The public is also opposing the pollution commonly experienced in low-level manufacturing sectors. Such demands have greatly eroded China’s cost advantage. Consequently, the country can no longer provide low-end and labour intensive goods as cheaply as before (Dempsey 2012).
It is clear that China’s position as a manufacturing superpower is bound to come to an end sooner than predicted (Dicken 2003). Mass exodus of companies has already started. Majority of the companies are relocating to neighbouring countries, such as Vietnam, which offer a cheaper and larger labour force (Dicken 2003). Many economists have predicted that the manufacturing dominance will move back to the United States. However, this may not be the case. The reason is that the crisis China is experiencing reflects the current situation in the U.S. America also failed to maintain its lead because its labour force was highly specialised. It demanded high wages and improved working conditions, making it expensive for manufacturers (Hill 2010).
Many manufacturers go to countries where they can produce at low prices (Hill 2010). As such, it is more likely that industries will move out of China into countries with these conditions, such as Vietnam. Vietnam has already adjusted its policies to take advantage of China’s predicament and attract more investors into the country. It is for this reason that Vietnam may rise to be the next superpower in manufacturing.