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6 White Paper on the Business Environment in China
2.7 Manufactured Articles
Manufactured articles have, by all ac- China’s manufacturing sector has also played a large role in
counts, played a major role in China’s rise to the status providing jobs for an estimated 27.2 percent of the employed
of economic superpower. Beginning in the early 1980s, Chi- population (some 211 million individuals) as of 2008.4
na’s manufacture of goods, ranging from textiles, footwear and
simple consumer goods to the more recent televisions, medical Now, due to rising costs in the more developed coastal re-
equipment and appliances, accounted for $916 billion in rev- gions, manufacturers that remain in the PRC are moving inland
enue in 2006—fully 95 percent of the total value of exports.1 to more rural areas—as a result, we may see a second period of
significant development as the nation’s undeveloped inland be-
According to one London-based analyst’s op-ed in China comes more industrialized.5
Daily:
In February 2010, China Daily reported that secondary in-
There are three secrets to China’s export success. First, dustry as a whole accounted for 46.8 percent of China’s 2009
by engaging in regional production chains, Chinese en- “general domestic income” (likely meaning gross domestic in-
terprises have been able step by step to absorb advanced come, or GDI),6 and contributed 49.3 percent to the nation’s
technology and upgrade their skills. According to the annual economic growth in 2010.
World Bank, more than a quarter of China’s manufac-
tured exports are hi-tech, one of the highest propor- According to the National Bureau of Statistics, in 2010 the
tions in the world. As a result, workers these days are far PRC’s “manufactured goods accounted for 19.8 percent of the
more productive than they were a few years ago, with world’s total in 2010, which allowed the country to overtake the
their increased output helping make up for the higher United States to become the world’s top manufacturer in terms
wages they are paid. of output.”7
Second, the sheer size of China’s manufacturing work- In January 2011 the Ministry of Industry and Information
force plus a focus on investment in factories and the in- Technology predicted slowdown in the growth of the nation’s
frastructure that surrounds them allows Chinese enter- industrial output within that year due to “the risk of falling ex-
prises to respond quickly to shifts in demand and ship ports as pressure for the yuan’s appreciation grew and global de-
their goods to market faster and at lower cost than their mand growth remained weak, as well as inflation, the financial
overseas rivals. problems of small and medium-sized enterprises (SMEs), and
environmental restrictions.”8
Third, many enterprises benefit from generous govern-
ment support in the form of cheap loans and a support- Having been a major engine for growth during the past
ive currency policy. Opinion is now divided on whether twenty years of economic prosperity, the manufacture of goods
the renminbi is close to “fair value”. But exporters in also saw some of the most prominent negative effects from the
China have the luxury of knowing that the People’s economic slowdown that became apparent in 2008: according
Bank of China will intervene if needed to prevent a to the Guangdong Provincial Department of Foreign Trade and
sharp appreciation in the Chinese currency.2 Economic Cooperation, more than 1,300 companies closed,
suspended operations or relocated out of the Pearl River Delta
The issue of the yuan’s value has been a persistent one; in the between January and September 2008. This figure is particular-
recent U.S. Presidential Election, Republican candidate Rom- ly relevant due to Guangdong and the Pearl River Delta’s status
ney vowed to label the PRC a “currency manipulator” on his as one of the most heavily-invested areas in light industrial man-
first day in office, thus triggering trade sanctions against Chi- ufacturing, as well as being one of the most affluent. It was ad-
nese exports. Following the re-election of President Obama, the ditionally reported that approximately 30 percent of foreign-in-
U.S. Department of the Treasury—which department is actu- vested enterprises in Guangdong reported losses in that period.9
ally responsible for making the determination of currency ma-
nipulation, not the President’s office—reported that the PRC’s With signs of the global economic slowdown turning more
control of the yuan did not meet the legal requirements for it apparent, the Central Government became extremely proactive
to be labeled a currency manipulator, although the same report at attempting to cushion companies from the ill-effects of the
called the yuan “significantly undervalued.” 3 global issues, including the 4 trillion yuan stimulus package,
which included adjustments to VAT, consumption and business
202 tax regulations.10
Furthermore, the promising notion of increased domestic
consumption was seen to offer a graceful solution to the issue
of diminishing export opportunities; the move toward non
2.7 Manufactured Articles
Manufactured articles have, by all ac- China’s manufacturing sector has also played a large role in
counts, played a major role in China’s rise to the status providing jobs for an estimated 27.2 percent of the employed
of economic superpower. Beginning in the early 1980s, Chi- population (some 211 million individuals) as of 2008.4
na’s manufacture of goods, ranging from textiles, footwear and
simple consumer goods to the more recent televisions, medical Now, due to rising costs in the more developed coastal re-
equipment and appliances, accounted for $916 billion in rev- gions, manufacturers that remain in the PRC are moving inland
enue in 2006—fully 95 percent of the total value of exports.1 to more rural areas—as a result, we may see a second period of
significant development as the nation’s undeveloped inland be-
According to one London-based analyst’s op-ed in China comes more industrialized.5
Daily:
In February 2010, China Daily reported that secondary in-
There are three secrets to China’s export success. First, dustry as a whole accounted for 46.8 percent of China’s 2009
by engaging in regional production chains, Chinese en- “general domestic income” (likely meaning gross domestic in-
terprises have been able step by step to absorb advanced come, or GDI),6 and contributed 49.3 percent to the nation’s
technology and upgrade their skills. According to the annual economic growth in 2010.
World Bank, more than a quarter of China’s manufac-
tured exports are hi-tech, one of the highest propor- According to the National Bureau of Statistics, in 2010 the
tions in the world. As a result, workers these days are far PRC’s “manufactured goods accounted for 19.8 percent of the
more productive than they were a few years ago, with world’s total in 2010, which allowed the country to overtake the
their increased output helping make up for the higher United States to become the world’s top manufacturer in terms
wages they are paid. of output.”7
Second, the sheer size of China’s manufacturing work- In January 2011 the Ministry of Industry and Information
force plus a focus on investment in factories and the in- Technology predicted slowdown in the growth of the nation’s
frastructure that surrounds them allows Chinese enter- industrial output within that year due to “the risk of falling ex-
prises to respond quickly to shifts in demand and ship ports as pressure for the yuan’s appreciation grew and global de-
their goods to market faster and at lower cost than their mand growth remained weak, as well as inflation, the financial
overseas rivals. problems of small and medium-sized enterprises (SMEs), and
environmental restrictions.”8
Third, many enterprises benefit from generous govern-
ment support in the form of cheap loans and a support- Having been a major engine for growth during the past
ive currency policy. Opinion is now divided on whether twenty years of economic prosperity, the manufacture of goods
the renminbi is close to “fair value”. But exporters in also saw some of the most prominent negative effects from the
China have the luxury of knowing that the People’s economic slowdown that became apparent in 2008: according
Bank of China will intervene if needed to prevent a to the Guangdong Provincial Department of Foreign Trade and
sharp appreciation in the Chinese currency.2 Economic Cooperation, more than 1,300 companies closed,
suspended operations or relocated out of the Pearl River Delta
The issue of the yuan’s value has been a persistent one; in the between January and September 2008. This figure is particular-
recent U.S. Presidential Election, Republican candidate Rom- ly relevant due to Guangdong and the Pearl River Delta’s status
ney vowed to label the PRC a “currency manipulator” on his as one of the most heavily-invested areas in light industrial man-
first day in office, thus triggering trade sanctions against Chi- ufacturing, as well as being one of the most affluent. It was ad-
nese exports. Following the re-election of President Obama, the ditionally reported that approximately 30 percent of foreign-in-
U.S. Department of the Treasury—which department is actu- vested enterprises in Guangdong reported losses in that period.9
ally responsible for making the determination of currency ma-
nipulation, not the President’s office—reported that the PRC’s With signs of the global economic slowdown turning more
control of the yuan did not meet the legal requirements for it apparent, the Central Government became extremely proactive
to be labeled a currency manipulator, although the same report at attempting to cushion companies from the ill-effects of the
called the yuan “significantly undervalued.” 3 global issues, including the 4 trillion yuan stimulus package,
which included adjustments to VAT, consumption and business
202 tax regulations.10
Furthermore, the promising notion of increased domestic
consumption was seen to offer a graceful solution to the issue
of diminishing export opportunities; the move toward non
