The Relocation Of Chinese Manufacturing Industry Is Noteworthy, But Not Terrible.

The life service industry will continue to improve, and producer services will grow stronger. This will largely offset the slowdown in manufacturing industry and continue to improve the service industry's position in the economy as a whole.

In recent years, the phenomenon of some overseas manufacturing industries moving abroad has attracted wide attention from the market, and the Sino US trade frictions over the past year have made it more of a concern for the market.

But this relocation is not necessarily so terrible. This is because:

First, the speed and scope of manufacturing relocation is not as fast and large as many people think.

Second, after the relocation of middle and low end manufacturing industries, the high-end manufacturing industry is rising.

Third, the growth of the service sector accelerated after the slowdown in the manufacturing sector.

We should realize that industrial migration is the natural law of world economic development, and also the engine of global economic growth and the engine of economic upgrading. In the modern world economic history, there have been five large-scale global industrial migration.

The first time occurred in the second half of the nineteenth Century to the early twentieth Century, when the British industrial revolution led by steam engine and spinning machine was introduced to the continental European countries.

The second occurred in the 30 ~40 era of twentieth Century. The rise of power, steel, chemical, railway and aviation industries in the United States moved the world manufacturing center from Europe to the United States.

The third time was in the twentieth Century 50~60 era. The upgrading of the industrial structure in the United States moved the traditional industries such as steel and textiles to the countries such as the Federal Republic of Germany and Japan.

The fourth time in the 60~70 era of twentieth Century, the Federal Republic of Germany and Japan transferred the labor-intensive industries such as light textile, electrical and mechanical industries to low cost Asian "four dragons" and some Latin American countries.

The fifth global financial tsunami from 1980s to 2008, Asia's "four dragons" and Japan, Europe and the United States moved labor-intensive industries and a part of capital and technology intensive industries to mainland China and other developing countries.

The migration of some manufacturing industries in the mainland to Southeast Asia, South Asia and Africa can be regarded as the sixth industrial migration in modern world economic history.

The above brief history of global industrial migration shows, on the one hand, that the relocation of some parts of the manufacturing sector to the outside world is an inevitable phenomenon of the economic development of the mainland and the whole world. On the other hand, it means that the relocation does not presage that the mainland will lose the status of manufacturing and economic power.

You see, the leading industries of the first five industries migrated out of traditional industries, but their development did not stop. Instead, they were replaced by new industries, that is, the rise of high-end manufacturing and service industries. The United States is still the world's economic leader after the third industrial migration 60 years ago. Other industries such as the United Kingdom, Germany and Japan have been ranked the five largest in the world in terms of scale and quality after decades or even hundreds of years of industrial migration.

China is the country with the world's largest population, third land area and the longest cultural duration, and has created the greatest economic growth miracle in human history in the past 40 years. Of course, the relocation of the manufacturing sector in the mainland is in progress. At present, this is only a prediction. But the three major trends mentioned above make us confident that this prediction will become a reality.

First of all, the speed and scope of manufacturing migration are not as fast and large as many people think. Over the past 10 years, how fast and how far are the actual migration speeds? In terms of speed, between 2008 and 2018, the average annual growth of Global trade increased by 2.4%. The average annual growth of the mainland's exports increased by 6.3%. That is to say, the mainland's exports not only maintained growth, but also increased by 3.9 percentage points faster than the growth rate of Global trade.

The proportion of mainland exports to global exports rose from 8.9% in 2008 to 12.9% in 2018. That is to say, the proportion did not drop, but increased by 4 percentage points. This clearly shows that the speed of relocation is not so fast as many people say. The first reason is that compared with the mainland, these Southeast Asian and South Asian countries have a limited economic volume and weak manufacturing capacity, and there are certain limits to the amount of industrial relocation that can be absorbed. Two, the existence of a complete and powerful industrial chain in the mainland makes it really only those middle and low end industries with shorter industrial chains, such as clothing, shoes and hats, furniture, etc., that the migration of some electronic information products is confined to the foundry trade, so the industrial scope of relocation is limited.

Secondly, the rapid rise of new manufacturing industries in the mainland will largely offset the impact of the relocation of low and middle industries on the entire manufacturing sector and economy, thereby maintaining the status of manufacturing and economic power in the mainland. The eight strategic emerging industries, namely, the new generation of information technology, energy saving, environmental protection, biological, high-end equipment, new materials, new energy, new energy vehicles and digital creative industries, are booming in the mainland. These industries, whether efficiency, efficiency or multiplier effect on economic growth and support for the status of manufacturing and economic power, are comparable to traditional industries such as clothing, shoes and hats and furniture. The development of these high-end new industries is fast, and the low-end industries are not afraid of moving even faster. The manufacturing industry and economy of the entire mainland will continue to grow at a high speed, and the quality of growth will be even higher, and the position in the world economy will be stronger.

Many people ask why mainland manufacturing industry is moving from the economically developed Pearl River Delta to the Yangtze River Delta instead of moving to the Midwest with lower labor costs. There are two reasons: first, the labor costs in the central and western regions are lower than those in the East, but they are more than twice as high as those in Southeast Asia, South Asia and Africa. The central and western regions have no cost advantages compared with Southeast Asia, South Asia and Africa. Two, the central and western regions are also marching towards new industries. The development targets are emerging industries rather than middle and low end traditional industries. Look at the development planning of the central and western provinces and the development and Reform Commission. This shows that the relocation of low-end industries will not cause a significant slowdown in the growth of the mainland's manufacturing sector, nor will it stop the pace of industrialization and modernization in the central and western regions.

Thirdly, the development of the mainland's service industry has been accelerating. In the past 10 years, the average annual growth rate is 13.1%, which is 4.3 percentage points higher than that of industrial growth. But its share of GDP is just over 50%, which is far from the level of 70%~80% in developed countries, which means that it will continue to grow at a high speed in the future. The life service industry will continue to improve and producer services will grow stronger. This will largely offset the slowdown in manufacturing industry, while continuing to enhance the position of the service sector in the whole economy and make the mainland a modern economic power with strong manufacturing and service industries.