Asian countries are increasingly watching jobs and manufacturing migrate to neighboring China.
China is reducing its reliance on imports from Southeast Asia as it makes more of the higher-value-added intermediate and capital goods it previously bought from abroad. That is threatening growth in countries whose export sales are already in danger of erosion from the U.S. economic slowdown.
More than 13,500 electronics-product workers in Singapore have lost their jobs since 2004, according to statistics from the Singapore Ministry of Manpower. An International Monetary Fund forecast released last week predicted weaker expansion next year in Singapore, the Philippines, Malaysia, Taiwan and South Korea.
"China is moving up the supply chain," said T. J. Bond, chief Asia economist at Merrill Lynch in Hong Kong. "The view that China produces labor-intensive goods but purchases high-value-added goods from abroad may be roughly correct today, but it need not last forever."
According to the IMF, China is already providing fewer "positive spillovers" to other East Asian countries. "The structure of China’s external trade in the last few years looks very different from 10 years ago," an IMF economist, Li Cui, said in a report last month. "As China begins to specialize in more parts of the production chain, its imports of intermediate goods from the region could start to fall."
A move by Toshiba, the largest Japanese chip maker, to transfer notebook-computer production to China cost its former source, the Philippines, as much as $1 billion in lost exports annually, according to figures from the industry’s national trade association.
The Chinese president, Hu Jintao, in his policy speech at the Communist Party Congress in Beijing last week, reiterated his goal of moving Chinese manufacturers from simple assembly of final products to designing and turning out high-technology goods.
J. R. Ong, managing director of First Engineering, based in Singapore, said, "Fifteen to 20 years ago, China could only make 20 to 30 percent of the components it needs to assemble products." Ong added, "Today, that’s climbed to 80 to 90 percent."
First Engineering supplies Hewlett-Packard and Seagate Technology. It employs 950 workers in six plants in China, Singapore and Malaysia. Ong said it had cut manufacturing jobs in Singapore by as much as 90 percent, moving most of them to China.
Some countries are already taking steps to reduce their dependence on exports of manufactured goods. The government of Singapore is promoting pharmaceutical, biomedical and petrochemical production, moving away from electronic components. Prime Minister Abdullah Ahmad Badawi of Malaysia is seeking to develop service industries to diversify the economy.
The IMF forecasts that Singapore’s growth rate will fall to 5.8 percent in 2008 from an estimated 7.5 percent this year, and growth in the Philippines will slow to 5.8 percent from 6.3 percent.
China’s so-called import substitution took off after its entry into the World Trade Organization in 2001, according to Grace Ng, an economist at JPMorgan Chase in Hong Kong. WTO membership brought a surge of foreign investment that helped lift China "up the production chain," she said.
China’s average annual import growth rate declined to 10.5 percent in 2005-2006 from 24 percent in each of the previous four years, while exports kept growing at about a 25 percent annual rate, according to United Nations statistics.
"The evolution of the new production networks in Asia is something that we need to watch," said Deepak Bhattasali, chief Asia economist at the World Bank in Washington. "We need to make sure that all the countries in Asia participate equally in it."
That is far from guaranteed. Moving operations to China often comes at the expense of workers and suppliers who are left behind.
Matsushita Electric Industrial, based in Japan, the world’s largest electronics maker, closed its mobile phone assembly factory in the Philippines in 2005 to focus on new-generation phones it will make in China.
The Chinese government is encouraging its steel makers to make more higher-grade metal to replace imports from rivals in Japan and South Korea.
LG.Philips LCD, based in Seoul, one of the world’s largest makers of liquid-crystal displays, plans to cut as many as 1,500 jobs in South Korea this year and relocate some manufacturing to Guangzhou in southern China, the Seoul Economic Daily reported in August.
"You have to be in China to survive," said Ong at First Engineering. "There is no other choice. Most of the players are already there."
Link to this article：China encourages home-made products, putting pressure on neighbors
Reprint Statement: If there are no special instructions, all articles on this site are original. Please indicate the source for reprinting:Mold Wiki，Thanks！^^