Why Is the World So Worried About China’s Industrial Relocation?

Rising Labor Costs and Their Impact

In the early stages of China’s industrial rise, the country benefited from extremely low labor costs. This advantage is evident in historical per capita income data. Since around 2010, however, labor costs in China have been steadily rising, changing the dynamics of global manufacturing.

Industrial Clusters: China’s Hidden Advantage

China has formed powerful industrial clusters in key sectors like white goods, electronics, and hardware. Take DJI in Shenzhen for example—its rapid growth is supported by the local supply ecosystem, enabling companies to source nearly any component on demand. This kind of efficiency is rare and reinforces China’s position as a world-class OEM/ODM powerhouse.

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Domestic Market Size and Cost Efficiency

China’s massive domestic market gives it a distinct cost edge. With strong internal demand, large-scale enterprises thrive, leading to economies of scale. High sales volumes reduce unit prices, making Chinese products globally competitive in price.

World-Class Production Efficiency

Chinese workers are highly efficient, and China ranks among the top globally in manufacturing productivity. Apple CEO Tim Cook once praised this, citing workforce efficiency as one reason Apple is hesitant to relocate iPhone production back to the U.S.

Overseas Chinese and Strategic Capital Inflows

China’s economic growth also benefited from the support of over 30 million overseas Chinese. Ethnic Chinese communities, especially in Southeast Asia, brought capital and technology into China—even after the post-1989 sanctions. Geographic proximity made investment in China both logical and profitable.

Strategic Geopolitical Positioning

East Asia is one of the world’s three major economic regions. China’s close proximity to Japan, South Korea, Taiwan, and Singapore places it at the center of regional industrial transfers, making it a natural hub for global manufacturing relocation.

Government Infrastructure and Policy Support

China is often dubbed the “infrastructure maniac” for a reason. Government-led infrastructure investment has been unmatched globally. The strong, centralized push for development—under slogans like “economic development is our central task”—has led to unparalleled coordination and execution capabilities.

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Comparative Advantage and WTO Accession

Economists like Justin Yifu Lin helped shape China’s industrial roadmap, focusing first on light industry and expanding upward. Thanks to President Clinton and China’s entry into the WTO in 2001, China’s real economic takeoff began. Despite skepticism at the time, China proved its resilience and industrial might.