Out of China


from Press News, posted 04/09/2013 - 05:44

The New York Times has just published a very good article by Keith Bradsher on how more and more companies are diversifying their production out of China to Southeast Asia, looking to cut costs and reduce their reliance on a single manufacturing source. There is also the issue of avoiding labour shortages as the demographic consequences of China’s one-child policy begin to bite.

Boom-time Cambodia (picture courtesy Kheang Un)

Boom-time Cambodia (picture courtesy Kheang Un)

The focus of the article is on Cambodia where last year the amount of foreign direct investment per head overtook that for China. That statistic sounds impressive until one hears that foreign investment in Cambodia rose to $1.5 billion but that for China was $119.7 billion.

Moreover, as Keith Bradsher notes:

But multinational companies are finding that they can run from China’s rising wages but cannot truly hide. The populations, economies and even electricity output of most Southeast Asian countries are smaller than in many Chinese provinces, and sometimes smaller than a single Chinese city. As companies shift south, they quickly use up local labor supplies and push wages up sharply.

There are other issues. For instance, as a publisher printing in Asia, the actual printing price may not be the issue. Sophistication of machinery and labour conditions will trouble some but the big killer is shipping. Try moving a tonne of books in a hurry from Phnom Penh versus Hong Kong or Singapore and you will see a huge difference in price and even feasibility.

Logistics is only one issue with doing business (and general economic growth) in Cambodia – governance concerns, corruption, land alienation, deforestation; these are just as few of the negatives.

For a detailed analysis of Cambodia’s economic transformation in recent years, we we refer you to the book of that name edited by Caroline Hughes and Kheang Un. This is an excellent resource that not only explores the impact of the boom on governance, economic structure, and opportunities for the poor but also provides new insights into the relationship between economic growth and political stability in post-conflict societies.

Meantime, scholars may also be interested to hear of a new blog just launched – East by Southeast – looking at the connections between China and Southeast Asia. With the rise of China and its opening up to the world, there has been a revival of movement across borders that for decades had been closed. Indeed, previously difficult or impossible communication is now commonplace – for instance, write the authors, ‘you can now drive a container truck from Kunming to Bangkok in less than a day on what was once previous non-navigable terrain’. At the same time they warn of fisheries depletion in the Mekong watershed. All in all, this is a good initiative that we hope to contribute to.


 

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