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Made in China: From World Sweatshop to a Global Manufacturing Center?

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  • Yun-Wing Sung

    (Department of Economics Chinese University of Hong Kong Shatin, Hong Kong, SAR, China)

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    Abstract

    This paper argues that foreign investment is a second-best instrument that helps China to succeed in export-led growth by circumventing the many distortions that discriminate against domestic private enterprises. China's dependence on foreign investment for exports should decline as China builds up its market economy, but its generous preferences for foreign investors may unduly prolong its dependence. It is found that China's exports are increasingly dominated by the low value-added processing exports of foreign affiliates. In the case of Hong Kong investment in export processing on the Chinese mainland, the value-added in the Mainland is often less than that of re-exporting the output in Hong Kong. Since 2004, China has amended its treatment of foreign investments to attract higher-quality foreign investment and upgrade processing exports in order to transform itself from a world sweatshop to a global manufacturing center. The policies appear to have the intended effects. (c) 2007 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

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    Bibliographic Info

    Article provided by MIT Press in its journal Asian Economic Papers.

    Volume (Year): 6 (2007)
    Issue (Month): 3 (October)
    Pages: 43-72

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    Handle: RePEc:tpr:asiaec:v:6:y:2007:i:3:p:43-72

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    Cited by:
    1. Chen, Xikang & Cheng, Leonard & Fung, K.C. & Lau, Lawrence J. & Sung, YunWing & Yang, C. & Zhu, K. & Pei, J. & Tang, Z., 2008. "Domestic Value Added and Employment Generated by Chinese Exports: A Quantitative Estimation," MPRA Paper 15663, University Library of Munich, Germany.
    2. Fischer, A.M., 2010. "Is China turning Latin? China’s balancing act between power and dependence on the wave of global imbalances," ISS Working Papers - General Series 496, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.

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