PRC Moving On Up the Value Chain

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Great little article in the New York Times Friday on PRC economic development policy. To readers of China Hearsay and, frankly, readers of most other China blogs that deal with development issues, the Times piece will not tell you anything you don’t already know. To everyone else this is a nice primer/reminder of what the PRC is trying to achieve with policy and where the government hopes the country will be in the next 10-50 years.

A couple of good excerpts:

No longer content to be the home of low-skilled, low-cost, low-margin manufacturing for toys, pens, clothes and other goods, Chinese companies are trying to move up the value chain, hoping eventually to challenge the world’s biggest corporations for business, customers, power and recognition.

The government is backing the drive with a two-pronged approach: using incentives to encourage companies to innovate, but also moving to discourage low-end manufacturers from operating in southern China. That step would reverse one of the crucial engines of this country’s spectacular economic rise.

But by introducing tougher labor and environmental standards and ending tax breaks for thousands of factories here, the government has sent a powerful signal about its global ambitions, and helped encourage an exodus of factories from an area long considered the world’s shop floor.

We’ve heard a lot of folks complain about China’s labor and environmental policies, usually tying this to trade issues. I haven’t heard many of these people bring up China’s development plans and the pivot away from low-end manufacturing. I get the feeling that as jobs migrate from South China over to Vietnam and Bangladesh, and China moves more into high-tech, the same people will find other things to complain about.

Another good quote:

Government policies now favor high-tech economic zones, research and development centers and companies that promise higher salaries and more skills. A computer chip plant being built by Intel in the northern city of Dalian is welcomed; a textile mill churning out $1 pairs of socks is not.

“When a country is in its early stages of development, as China was 20 years ago, having an export processing center is good for growth,” said Andy Rothman, a longtime China analyst at CLSA, the investment bank. “But there’s a point when that’s no longer appropriate. Now, China’s saying, ‘We don’t want to be the world’s sweatshop for junk any more.’ ”

The sad part of all this is that Beijing has been discussing this development strategy for many years. Now that they are implementing the policy, we get to hear from all those politicians and journalists who have living in caves for the past ten years and who now describe all this as a "new initiative". Shameful.