The Exodus Of Chinese Manufacturing: Shutting Down ‘The World’s Factory’
It’s not breaking news that manufacturing is leaving China.
Over the last twenty years, Chinese manufacturing has dominated over the rest of the world. This was driven primarily from optimized shipping lanes and extremely cheap labor rates by way of government subsidies. These two benefits made enough sense financially for brands to withstand quality issues, shipping timelines, communication barriers, and annual production delays during the Lunar New Year timeline.
However, in the last 3 months, Chinese manufacturing got hit by what can only be described as “a perfect storm” of incidents. A mixture of longstanding issues and new challenges such as high tariffs, Covid-19, and increased geopolitical tensions have resulted in a mass exodus from Chinese manufacturing, and triggered the start of the downfall of the country’s manufacturing dominance.
To understand what might make China fail however requires an understanding of what made China’s manufacturing economy so successful in the first place.
China grew to become the “world’s factory” over the course of the last 40 years. This started with former president Deng Xiaoping ordering an economic reform in the late 1970s and introducing the concept of a free market to China for the first time.