Friday, December 8, 2017

Chinese Manufacturing Not Likely to Relocate in Africa

The Center for New Structural Economics at Peking University published in December 2017 a report titled "Adjusting to Rising Costs in Chinese Light Manufacturing: What Opportunities for Developing Countries?" by Jiajun Xu, Stephen Gelb, Jiewei Li and Zuoxiang Zhao.

The authors interviewed 640 private companies (42 percent owned by domestic Chinese owners and 52 percent wholly owned foreign subsidiaries) in four Chinese cities concerning their plans for moving to lower cost production areas. The main challenge they faced in China was rising wage costs.

The implications for Africa are important. Of the 62 firms that had invested abroad or planned to do so, southeast Asia was a much more likely destination than Africa, where only three of the firms had invested to date, all in footwear in Ethiopia. Only two firms indicated Africa was a preferred destination for planned foreign direct investment (FDI). The survey suggested there is a need for realism on the potential for jobs transfer from China to low income host countries.

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