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Departure of advanced manufacturers sends warning to Shenzhen and the nation

31 July 2017 No Comment

By Wang Jiamei in Global Times, July 30, 2017 at 18:23 hrs
The author is a reporter with the Global Times.
An investigation has found that Shenzhen, South China’s Guangdong Province, isn’t just losing low-end factories, it’s also losing advanced manufacturers, a warning of a hollowing out of the local industrial base. Higher costs for rent, labor and raw materials certainly explain some of the situation for advanced manufacturers, but another major factor is the excessive pursuit of tertiary industry, a misguided development strategy that deserves serious attention.

While it is worth praising the Shenzhen government for encouraging the elimination or transfer of low-end and obsolete manufacturing capacity in recent years, it is not a good sign that advanced producers – some of them very large – are packing up and leaving the city now, according to the investigation report, which was released by the Shenzhen Municipal Committee of the Chinese People’s Political Consultative Conference last week. Among the major moves:

ZTE shifted its production base to Heyuan in Guangdong; BYD spent heavily to establish a new-energy car production base in Shanwei, Guangdong; Huawei and DJI, the world’s largest consumer drone producer, moved their offices to Dongguan, Guangdong.

Electronics producer Foxconn moved its production lines to Zhengzhou, Central China’s Henan Province and Guiyang, Southwest China’s Guizhou Province.

Soaring housing prices and the costs mentioned above have of course contributed to the departure of high-end manufacturers, but the city’s overreliance on tertiary industry should not be ignored. In 2016, the added value of the tertiary sector accounted for 60.5 percent of Shenzhen’s GDP, with the added value of the secondary industry making up 39.5 percent.

While the government and the media have lauded the growing role of the tertiary sector in industrial restructuring, it is actually a dangerous trend that will undermine the city’s core competitiveness and lead to the hollowing out of local industries.

The problem is not just limited to Shenzhen. It is threatening the entire Chinese economy. Domestic entrepreneurs are rushing into the services sector, especially low-end segments such as take-out and delivery services. This is the wrong approach. No country in the world has relied on low-end services to achieve modernization, and the excessive development of the tertiary industry will only make a country’s economy lose real momentum and become unsustainable.

For just this reason, China cannot rely on the development of take-out and delivery services to achieve its economic restructuring. Low-end services offer convenience to the public, but there is nothing they can do to help the Chinese economy stay competitive. Therefore, it is crucial for the government to get more people and businesses engaged in manufacturing instead of low-end services activities so as to guard against a hollowing out in China.http://www.globaltimes.cn/content/10

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