"New Observations on Made in China" - A Rational Look at Foxconn's Incoming and Outgoing
2024-08-17
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International industrial transfer is essentially a market choice based on the dynamic changes in the comparative advantages of various countries. When some multinational companies in China relocate part of their industrial chains, we do not need to exaggerate and interpret it, but must firmly believe that Made in China still has irreplaceable advantages; when some multinational companies continue to expand their investment in China, we should not be complacent. Made in China still needs to enhance its core competitiveness and move up the value chain.
Recently, the news about "Foxconn's 'return'" has attracted attention. First, Foxconn's parent company Hon Hai Technology Group announced that Foxconn will invest about 1 billion yuan to build a new business headquarters building in Zhengzhou. Then, data released by International Data Corporation showed that in the second quarter of this year, Apple's mobile phone shipments in the Chinese smartphone market had fallen out of the top five. Some analysts believe that one of the main reasons for the decline in Apple's mobile phone sales in China is that the quality pass rate of mobile phones assembled in India is only about 50%.
In fact, it is normal for industrial chains to have inflows and outflows. International industrial transfer is essentially a market choice based on the dynamic changes in the comparative advantages of various countries. Judging from the previous rounds of global division of labor and industrial transfer, the driving force for adjustment is efficiency, that is, industries will be transferred to where the cost is low and the efficiency is high. In the context of economic globalization, capital will actively adjust the global production capacity layout in order to reduce production costs and expand market share. Therefore, whether it is China's successful attraction of a large amount of foreign investment over the years, undertaking large-scale global manufacturing transfers, and thus becoming the "world factory"; or some multinational companies in China currently relocating part of their industrial chains, and some Chinese companies deploying industrial chains abroad, they are all reasonable behaviors for enterprises to promote diversified layouts, and are also normal phenomena that conform to industrial laws.
It is important to analyze the reasons behind the industrial transfer. At present, in addition to geopolitical factors, the key to the relocation of my country's industrial chain is that as China's economic development level improves, the costs of labor and land are gradually increasing. Compared with Southeast Asia and other places, China has lost its comparative advantage in labor-intensive industries, resulting in the relocation of some low-end links in the manufacturing industry. However, we don't have to worry too much about the transfer of low-end industries. This not only reflects the trend of industrial restructuring and high-quality development of China's manufacturing industry, but also forces the upgrading of the industrial chain. This can also be seen from the fact that more and more foreign capital has actively invested in China's advanced manufacturing, high-tech, energy conservation and environmental protection and other fields in recent years.
Made in China is more than just a cost advantage. China's super-large market and the most complete industrial system can significantly dilute the cost of manufacturing. At the same time, industrial chain clusters, logistics supply chains, production technology, industrial workers and industrial supporting environments have created new advantages for Made in China, namely the dual advantages of high production efficiency and low production costs. A previous research institute analyzed that even if Apple wanted to transfer 10% of its production capacity from China, it would take about 8 years, because China has a complete industrial chain ecology, higher production efficiency and more professional workers. It is also because of the efficient and collaborative local supporting supply chain that many industrial clusters have maximized the improvement of production efficiency and the reduction of production costs, and can respond quickly to market changes, becoming industries that cannot be moved.
We should look at Foxconn's "departure" or "return" rationally. When some multinational companies in China relocate part of their industrial chain, we don't need to exaggerate and interpret it as "someone is going to run away again". We must firmly believe that Made in China still has irreplaceable advantages. At present, in addition to the existing advantages of scale, efficiency, integrity, market potential, labor resources, etc., Made in China is aiming to develop new quality productivity, constantly seeking innovative breakthroughs, transformation and upgrading, and moving towards high-end, intelligent, and green, which not only enhances core competitiveness, but also promotes the optimization of the global industrial chain.
On the contrary, we cannot be complacent when some multinational companies continue to expand their investments in China. Admittedly, this represents recognition and affirmation of the advantages of Chinese manufacturing, and will also have a certain positive impact on Chinese manufacturing, but this cannot mean that we turn a blind eye to its shortcomings and risk factors. In order to seize the initiative in this global industrial chain and supply chain reconstruction, Chinese manufacturing must enhance its core competitiveness and move up to the high end of the value chain. This requires us to effectively reduce taxes and burdens for enterprises, continuously optimize the business environment, actively develop advanced manufacturing, focus on strengthening the supply chain, and gain the right to speak in the global industrial chain. At the same time, we will accelerate the orderly transfer of industries in the domestic gradient, transform and upgrade traditional industries, and focus on promoting Chinese manufacturing to strengthen controllability and enhance competitiveness. (Author: Huang Xin Source: Economic Daily)
