Tuesday, January 27, 2015

China and Industrial Policy in the South

The Huajian factory outside Addis Ababa [The Economist]
What I'm reading:  A new paper by Daniel Poon at UNCTAD: China's Development Trajectory: a Strategic Opening for Industrial Policy in the South, UNCTAD, December 2014.

Poon points out that China is at a crucial crossroad, serving at the same time as the world's low-end workshop and its most prominent proponent of industrial policy. China wants to move up the value chain, and Poon says: "The gap between China’s industrial ambitions and its current capabilities provides a strategic opening for other developing countries to bargain for enhanced opportunities for domestic investment, learning, technical change and structural transformation."

This paper helps frame the work on Chinese industrial investment in Ethiopia that we are doing at SAIS-CARI. I am just back from Addis-Ababa where we interviewed a number of firms in the leather sector with some kind of skill-building or technology-transfer linkage with China. Fascinating.

1 comment:

  1. If you talk to the Chinese investors who have invested in Africa they will tell you that on the average, an unskilled Chinese worker in China can produce the same amount of goods that of 4 unskilled workers in Africa, given the same level of equipment / technology

    Labor intensive factories are leaving China. Garment factories (or so called sweatshops) are mushrooming in Vietnam, Bangladesh, Pakistan and Ethiopia, and in the garment industry, China has moved up the ladder, from the producer of cloths, which involved cutting, sewing, and such, to the producer of fabrics and other accessories to be used by the sweatshops

    Similarly the shoe factories. They are moving out of WenZhou - a traditional 'shoe source' for the billions of Chinese in China

    Even factories on higher level of technology are moving out too, such as factories producing cheap handset. They are moving to Vietnam, for example

    As for China, it is moving up a notch, or couple of notches - instead of making stuffs, China right now is big in designing, and the government is putting a lot in encouraging innovation

    China is in transition, and it is transforming itself at a pace that is outrageous, if viewed by the Western standard. China has moved from the pre World War 2 tech level of factories, which was the norm in China from the 1970's to the late 1990's, to almost meeting the level that of France or GB

    Of course China has still a lot of catching up to do. Germany, Japan, and the States are still well ahead of China in term of technological prowess, but China is betting heavily in the catch up game

    Barring any unforeseen calamity, give China 50 years and it will be on par with America / Japan / Germany