India's ambition is not setback for made-in-China
- By Zhang Jingwei
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E-mail China.org.cn, August 21, 2015
What happened to China's manufacturing industries? As the costs of Chinese labor have risen, labor intensive industries have been unable to survive in the Chinese market. These industries have begun to move on to other, newer markets where labor costs are cheaper. Ultimately, this change was inevitable.
China is now facing active industrial advancement and transformation, rising from low-end to hi-tech manufacturing. "Made in China 2025," a development strategy intent on upgrading China's manufacturing sector, has set the timetable and map for "made in China's" transformation and upgrade.
Things are developing quickly. However, there have been a few growing pains. While the older industries have begun to reorganize, many of the high-end industries aren't mature enough to take over, creating an industry void. Also, the recent economic downturn has amplified many of the industry's development difficulties.
This shift within the industry isn't a cause for panic. That being said, when high-end manufacturing isn't a large scale producer and low-end manufacturing begins moving its way to India, as well as other new markets in direct competition with China, this is worrying.
As members of the BRICS, China's economic growth is slowing, with Russia and Brazil being trapped in a spiraling downturn of low energy prices and limited resources and South Africa's economy not yet fully recovered from financial crisis, many Western economists, therefore, anticipate India to emerge as the new leader.
Prime Minister Narendra Modi of India is seen as the architect of India's "opening and reform." Acting as the Chief Minister of Gujarat from 2001 to 2014, he learned from China's "opening and reform" policies, making Gujarat the fastest developing area in India. With Modi's election as India's Prime Minister, the Indian people are hopeful he can use his experience to further develop the nation, and raise India's economy to China's level.
China and India both have their own unique advantages. China's advantage is represented by its complete infrastructure and status as a global manufacturer. India's unique advantages are its developed software industry, national English-speaking environment and its middle class.
Perhaps the most similar feature the two nations share in common is their massive populations. Both nations have unparalleled demographic dividends. China's establishment and status as a manufacturing country was due, in large part, to the nation's demographic dividend together with favorable policies. With labor costs rising in China, the manufacturing industry is transforming radically. At the same time, India has more and more opportunities to attract business with low labor costs and a huge demand for infrastructure construction. Now, Modi's reform policies are also in place, and India has already secured a few industry advantages.
As the manufacturing industries in both China and India are beginning to adapt and transform, Western analysts are more in favor of India. They estimate that by 2016, India's economic growth rate will surpass that of China, claiming that India's GDP will also approach the level of China. This newfound rivalry between China and India, and the trend of Chinese manufacturing industries moving to other, newer markets, has made China weary of potential crises, especially during the recent economic downturn and restructuring.
However, China shouldn't be too nervous. After all, China is miles ahead of India in terms of modernization. This rise in labor costs is merely a result of this modernization, while the industry's shift is due to market rules. China is in more need of industry transformation, rather than a maintained majority of low-end manufacturing, whereas India is now in a position to quickly absorb these low-end industries.
More importantly, China's economic capacity isn't simply disappearing. These changes are merely a direct result of the Belt and Road initiatives proposed by China. The exodus of China's capital and economic capacity will help to raise the global influence of Chinese companies, which will also nurture and grow the nation's soft power.
The writer is a research fellow at the Charhar Institute.
The article was translated by Zhang Rui. Its original version was published in Chinese.
Opinion articles reflect the views of their authors only, and not necessarily those of China.org.cn.
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