“Made in ASEAN” competitiveness increases China’s manufacturing needs “double upgrade”
Benefiting from cheaper labor, land and resource costs, “Made in ASEAN” may be gradually taking over the market dominance that “Made in China” once had.
Some Japanese media recently reported that the amount of investment by Japanese companies in ASEAN countries has exceeded investment in China for three consecutive years. This data is not surprising – just three years ago, the total foreign direct investment (FDI) absorbed by ASEAN countries exceeded that of China.
What is more intuitive than the data is that at the beginning of this year, Dongguan Xingang Shoes, which once manufactured for Nike and Prada, announced that it would cease production and transfer its production capacity to Southeast Asian countries. South Korea’s Samsung also announced this year that it would place an order for 200 million smartphones for production in Vietnam.
The reason why China’s manufacturing industry is “flying southeast” is not difficult to explain. The “2016 Electronic Information Industry Development Blue Book” released by the China Electronic Information Industry Federation stated that China’s labor costs are currently significantly higher than other developing countries in Southeast Asia – in 2015, the monthly salary of Chinese workers was as high as 325.6 US dollars, while the average monthly salary of Vietnamese workers during the same period was only is $149.9. In addition, financing is expensive, and the rising costs of logistics, electricity, oil and other factors cannot be ignored.
“In specific fields such as traditional machinery manufacturing and textiles, China and ASEAN do have a relationship of production capacity competition.” On the 2nd, the 2016 China-ASEAN Production Capacity Cooperation High-level Conference was hosted by the China Economic and Social Council and the Chinese People’s Political Consultative Conference Guangxi Zhuang Autonomous Region Committee. The forum was held in Nanning. Chen Yantai, executive dean of the School of Politics and Public Administration of Zhejiang University of Technology, said in an interview with a reporter from China News Service during the forum.
In addition to “hand-to-hand combat” in the international market, the competition between “Made in China” and “Made in ASEAN” may also spread to the field of production capacity cooperation.
Industry insiders revealed that some ASEAN countries are no longer satisfied with just importing production capacity from China, but prefer to introduce Chinese talents and technology, turning production capacity cooperation into an “upgrading tool” for “Made in ASEAN”.
But for China, as the proportion of foreign investment in the manufacturing industry continues to decline and manufacturing companies continue to migrate overseas, encouraging companies to set up factories overseas may exacerbate the risk of industrial hollowing out in certain fields and use cost advantages to affect the market. “Made in China” has caused a “crowding-out effect.”
The hollowing out of industries may lead to an increase in unemployment and a decrease in economic growth. After all, at a time when structural transformation has not yet been completed, manufacturing is still the main driving force for China’s economic development.
To solve this problem, “double upgrade” has become a necessary path.
The first is to promote the transformation and upgrading of manufacturing in China. In China’s official top-level design, promoting the positive interaction between international cooperation and domestic industrial transformation and upgrading is clearly one of the guidelines for international production capacity cooperation. Chen Yantai said that under the market regulation mechanism, local governments will tend to retain high-end industries and encourage the relocation of traditional industries with overcapacity, which in itself can force industrial upgrading in the region.
In the “Made in China 2025| Strategy”, the official clearly stated that it is necessary to promote the transformation and upgrading of traditional manufacturing industries and to achieve high-end leapfrog development in response to the development of new technological revolutions. This will be a key measure to avoid industrial hollowing out in production capacity cooperation.
The second is to promote the upgrade of China-ASEAN cooperation mechanism. Chen Yantai believes that changing the simple complementary goods trade structure between China and ASEAN and promoting intra-industry division of labor and even more detailed product division will help avoid vicious competition.
Most Chinese experts still believe that the benefits of cooperation between China and ASEAN far outweigh competition. Liu Yingqiu, former dean of the Graduate School of the Chinese Academy of Social Sciences, said that China is facing problems such as rising production resources and labor costs, while ASEAN countries also have shortcomings such as narrow markets, insufficient employment, and weak infrastructure. Strengthening complementary cooperation and abandoning zero A peaceful game is in the interests of both parties.
Liu Yingqiu believes that “promoting the interaction of production factors and production capabilities between China and ASEAN countries can not only awaken local ‘sleeping’ economic resources and explore various markets, but also help to achieve faster speed, lower cost, and higher quality and achieve mutual assistance and mutual benefit between China and ASEAN countries, which is a major significance of production capacity cooperation.”
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