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Prof. Yao Yang: China Remains World Manufacturing Center

Apr 03-2023   



Attending the Boao Forum for Asia Annual Conference, Prof. Yao Yang said that China won’t lose its status as ‘world factory’ over the next 10 to 20 years and rather it will continue to be the most important manufacturing hub in the world. He is Dean of both the NSD and BiMBA Business School.

 

As the world grapples with new changes in geopolitics, understandably companies are hedging by building presence in multiple countries, but Prof. Yao advised them to conduct rational evaluation of risks, such as the proportion of business to be moved out of China. So far, such relocations remain relatively insignificant compared with China’s economic heft and trade volume, he said.

 

He also believed that the shifting of certain manufacturing facilities to South-East Asia and South Asia is just part of a natural process, one accelerated by geopolitics. China has reached a development phase at which some labor-intensive firms are likely to move out. This indicates an upgrade in China’s industries and creates benefits for neighboring countries such as ASEAN nations and India. A tighter integration of manufacturing industries will take place among China and these countries, resulting in improvement of geopolitical conditions for China.

 

De-coupling between the US and China, as desired by some forces in the US, has proven hard to materialize. Insofar as semi-conductors are concerned, the US has intended to keep the punitive measures within a limited scope. On the other hand, statistics show that the trade between the two countries has rebounded to pre-trade war level. Both China’s export structure and the structure of its import from the US haven’t experienced any substantial change.

 

Due to China’s immense market and complete industry chains, Prof. Yao firmly believed that it is nearly unlikely for high-end industries to fully withdraw from China. He cited the example of Apple phones, of which the production is mainly concentrated in China and South Korea; even if some producing facilities are to shift to India and some other countries, the new host countries will still need to import some middleware products from China, which will spur China’s industrial upgrade but lead to higher costs for American firms.

Prof. Yao Yang: China Remains World Manufacturing Center

Apr 03-2023   



Attending the Boao Forum for Asia Annual Conference, Prof. Yao Yang said that China won’t lose its status as ‘world factory’ over the next 10 to 20 years and rather it will continue to be the most important manufacturing hub in the world. He is Dean of both the NSD and BiMBA Business School.

 

As the world grapples with new changes in geopolitics, understandably companies are hedging by building presence in multiple countries, but Prof. Yao advised them to conduct rational evaluation of risks, such as the proportion of business to be moved out of China. So far, such relocations remain relatively insignificant compared with China’s economic heft and trade volume, he said.

 

He also believed that the shifting of certain manufacturing facilities to South-East Asia and South Asia is just part of a natural process, one accelerated by geopolitics. China has reached a development phase at which some labor-intensive firms are likely to move out. This indicates an upgrade in China’s industries and creates benefits for neighboring countries such as ASEAN nations and India. A tighter integration of manufacturing industries will take place among China and these countries, resulting in improvement of geopolitical conditions for China.

 

De-coupling between the US and China, as desired by some forces in the US, has proven hard to materialize. Insofar as semi-conductors are concerned, the US has intended to keep the punitive measures within a limited scope. On the other hand, statistics show that the trade between the two countries has rebounded to pre-trade war level. Both China’s export structure and the structure of its import from the US haven’t experienced any substantial change.

 

Due to China’s immense market and complete industry chains, Prof. Yao firmly believed that it is nearly unlikely for high-end industries to fully withdraw from China. He cited the example of Apple phones, of which the production is mainly concentrated in China and South Korea; even if some producing facilities are to shift to India and some other countries, the new host countries will still need to import some middleware products from China, which will spur China’s industrial upgrade but lead to higher costs for American firms.