On The Development Footprint Of China Labor-intensive Production

Since1990s, East Asian region has witnessed rapid development of product fragmentation which leads to the gradual formation of the East Asian production networks. The vertical intra-industry trade becomes the most important trade pattern accordingly. During the process of involving in East Asian production networks, China focuses on the development of labor-intensive production on the basis of its comparative advantage, and constantly strengthens the cooperation with other East Asian countries. In all, the rise of China has promoted the formation of East Asian production networks and increased the status of East Asia in global production sharing.First of all, this thesis analyzes China’s position in East Asian production networks from the perspectives of the intermediate product trade and final product trade separately and explains why China lies in this position. It’s found that China is the assembly and processing center of intermediate product, and the export platform of final product in East Asian production networks. It mainly imports the intermediate product from Japan, Asian Dragons and Tigers, etc and exports the final product to the western developed countries. This is the so-called "Triangular Trade" which is considered as the most impressive influence of China’s rise as the assembly and processing center to East Asian trade pattern. What’s more, among all the reasons which make China become the assembly and processing center and the export platform of East Asian production networks, the opportunity of international product fragmentation is the driver, the abundant and cheap labor force is the basis, the selective trade policy of China is the policy guarantee, and the sound economic environment is an very important factor.Secondly, the thesis explores the changes of current international and domestic economic environment. With regard to the change of the international environment, the frequent natural disasters results in people’s deep thinking on the vulnerability of global supply chain; the rise of trade protectionism during the economic crisis deteriorates the international trade environment; the "Triangular Trade" pattern which overly depends on external demand is questioned by much more people, especially during the economic crisis. Besides, in terms of the change of the domestic environment, both the sharp increase of Chinese labor force cost and substantial appreciation of Renminbi have made China gradually lose its original comparative advantages in the international division of labor and also have disastrous effect on China’s economy itself; still, the strategic choice of foreign trade policy, to some degree, has blocked the sustainable development of labor-intensive production in China.Last but not least, the thesis proposes the development footprint of labor-intensive production on the basis of rethinking its meanings. The changes of international and domestic economic environment do have brought huge challenges and threats to the development of labor-intensive production in China. Under this circumstance, some people insist that China should give up labor-intensive production. The reasons are as follows. First, labor-intensive production belongs to low value added production; besides, China is gradually losing the comparative advantages in labor-intensive production; also, giving up labor-intensive production could do good to ease trade friction and get rid of the potential threats for national economic security. However, in the past, the development of labor-intensive production has made great contribution to China’s economic and social aspects including promoting the development of trade and economy, creating plenty of jobs, upgrading the structure of export product, shaping the industry agglomeration effect, etc; on the other hand, China still has many comparative advantages for its development of labor-intensive production, such as relatively abundant and cheap labor force, perfect supply chain system, potential consumer market, sound infrastructure construction, steady macroeconomic conditions, etc. Consequently, it’s concluded that China needs to proceed the development of labor-intensive production, and the footprint is as follows. In the short to medium term, the labor-intensive production needs transferring from eastern coastal area to central and west area in China. After that, the eastern coastal area will emphasize the R&D and technological innovation. The transferring could effectively overcome the challenges and threats to the development of labor-intensive production brought by the change of domestic economic environment. During the industrial transferring, the government needs to strengthen the infrastructure construction, and, together with the local government, builds a perfect supply chain network in central and west area of China. At the same time, it’s very important to speed up the process of urbanization in central and west area of China and also the Renminbi internationalization. In the long term, China should construct a self-circle economic system which could thoroughly overcome the challenges and threats brought by the change of both international and domestic economic environment. And the following measures needs to be taken:encouraging and supporting R&D and technological innovation in east costal area of China; constructing China’s own production networks which could replace the one of East Asia; developing domestic company which could take advantage of China’s own production networks; expanding domestic demand, etc.