x Abu Dhabi, UAETuesday 25 July 2017

China's eastern seaboard no longer has a pull

Building Brics: It is more than a decade since the Chinese government unveiled its Go West campaign aimed at boosting the poorer regions in the country's west, especially Sichuan.

It is more than a decade since the Chinese government unveiled its Go West campaign aimed at boosting the poorer regions in the country's west, especially Sichuan, the giant municipality of Chongqing, the restive far-western area of Xinjiang and the autonomous region of Tibet.

The government spent billions of dollars on infrastructure, offering grants to businesses to move west and help ease the yawning wealth gap by boosting the second and third-tier cities of the western regions.

The government has kick-started investment in inland regions through the Go West policy, which is designed to help curb regional differences in economic development.

Economic growth in Sichuan and Henan will probably outpace that of the manufacturing hub Guangdong for a third straight year this year, according to research by Nomura.

Rising wages in these provinces means the move to the west has not been driven by a need to make savings on labour costs but merely to find the workers.

Migrants have traditionally come from provinces such as Henan and Sichuan but now the companies are moving to them.

Wages in Sichuan and Henan have risen by 120 per cent in the past six years because of economic growth, increasing local competition for labour and slower population growth nationwide.

Differences in average wages between inland provinces and Guangdong have more than halved in the past six years, driving the two areas toward labour-price parity, according to a Bloomberg Industries analysis of workforce, wages and labour demand.

Wages in Chongqing, a municipality administered by the central government in Beijing and with a population of 32 million people, have surpassed those in Guangdong, the Bloomberg research shows.

The Sichuan capital Chengdu is a case in point.

The National recently reported extensively on the Global Economic Forum held in the city and this month Chengdu has just unveiled the world's biggest building, the New Century Global Centre.

It's not the tallest tower but the centre is absolutely huge, the largest free-standing building by floor space in the world, capable of housing 20 Sydney Opera Houses, and almost three times the size of the Pentagon in Washington.

The monster structure is 500 metres long, 400 metres wide and 100 metres high and sprawls over 1.7 million square metres in an area of Chengdu, the Tianfu New District, that is being constructed as part of the city's plans to boost its international profile.

The Chicago architects Adrian Smith and Gordon Gill have been given the task of building the 1.3 square kilometre sustainable city that will host the new building.

Chengdu's stated ambition is to become the Silicon Valley of China. Already, between half and two thirds of iPads sold worldwide are assembled in Chengdu, while the computer giant Intel makes up to half of its chips in the city.

These factories are populated by local workers who previously would have headed to China's eastern seaboard.

One of the highest-profile examples of a big manufacturer being forced to move inland because of labour shortages in the traditional manufacturing areas is the Taiwanese electronics manufacturer Foxconn, which is a major supplier of Apple but also many other companies.

Foxconn's workforce has increased by 50 per cent in the past two years to 1.2 million and much of the growth in the labour force has come in inland areas such as Sichuan and Henan province.

The company employs 400,000 people in its traditional manufacturing hub Guangdong, nearly all of them migrant workers, and to where most migrant workers in China tend to gravitate.

Foxconn employed 300,000 people in Henan at the end of last year, compared with practically none in 2010. The Sichuan and Chongqing workforce has jumped to 150,000 from almost a standing start during the same period.

Only about 14 per cent of the workers at the Foxconn plant in Sichuan are migrant workers.

 

business@thenational.ae