“I’m leaving,” said Frank Lin, a Taiwanese businessman who is shutting down his factory in Dongguan. “There’s no future for this place.”
Lin, 55, sat in a cavernous dining room at the Haiyatt Garden Hotel where only two tables had diners. This room used to be packed every night, Lin said.
Americans are more accustomed to hearing about Rust Belt manufacturing towns in decline — after the jobs left for China. But in China, too, there are places where factories are shuttering and the future is uncertain.
China’s reliance on cheap labor has powered the country’s economy to unprecedented heights. But China’s manufacturing sector is running into problems these days: squeezed from one end by places with even lower labor costs, such as Laos and Vietnam, and yet struggling to move to higher ground making more advanced products because of competition from developed nations such as Germany and the United States.
“China’s manufacturers are in an extremely hard situation and facing what we call ‘a sandwich trap,’ ” said Zhang Monan, a researcher in economics at the State Information Center, a government think tank.
For China’s new leadership, which completed its once-in-a-decade turnover this month, the coming years include a big test. Even as China is poised to become the world’s biggest economy, it is still straining to make the transition from “the world’s factory” to becoming an economy on par with the United States.
During the transition, the outgoing leader of the Communist Party, Hu Jintao, said that China’s “unbalanced, uncoordinated and unsustainable development” remains a major problem for the country, according to the official Xinhua news agency.
In a way, China’s model for its manufacturing sector has become the United States.
“China has to change its manufacturing strategy to be more innovative in technology and compete with a ‘reviving’ U.S.,” wrote Zhang, the researcher, this summer in an op-ed for the China Daily titled “Wake-Up Call for Industry.” “China is expected to face fiercer-than-ever competition from the United States in the manufacturing sector, making it all the more urgent for Beijing to expedite its industrial upgrade.”
It has been clear for a few years now that places such as Dongguan must adapt or risk getting wiped out. In March 2008, Wang Yang, the party secretary for Guangdong province, visited Dongguan, which was then a buzzing hub of activity.
“If Dongguan does not start to transform its industrial structure today,” he warned, according to the South China Morning Post, “it will be transformed [and lose out] tomorrow.”