The world manufacturing map is being rebuilt

The sharp drop in Dongguan’s GDP growth is not surprising.

In fact, since the Industrial Revolution, manufacturing has been shifting in various industrial belts around the world. A lucky few follow the technology, update the industrial chain again and again, and struggle to stay at the poker table.

Take Japan as an example, after the 1970s, its semiconductor and automobile industries rose, and the entire Japanese economy grew miraculously. When these industrial chains were transferred to Taiwan, mainland China and South Korea, Japan turned to low-profile but deep-moat precision manufacturing. Taking the most important chip production as an example, a variety of precision raw materials and components made in Japan are irreplaceable.

Cities that fail to upgrade fall into the mire, typically in America’s Rust Belt. When the auto industry shifted to East Asia in the second half of the 20th century, Detroit, America’s richest city, failed to find an alternative and became a byword for poverty, chaos and hopelessness.

For any manufacturing-dominated city, the cost of missing out on the tech boom would be unbearable. There are only two outcomes waiting for it, either to keep the market in the vicious competition of low prices, or to be swept completely into the margins.

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Dongguan labor-intensive manufacturing industry mostly chose the former. In an interview with the 21st Century Business Herald, a practitioner said: Overseas customers will divide a sample into several companies before placing an order, which does the fastest and best, and the price is favorable, and who will be left alone. The only way is to cut prices.” No matter how small the profit is, it is necessary to grab the order and maintain the customer first.”

Of course, Dongguan is a long way from a Detroit-style crash. After all, Dongguan’s woes are not unique to falling exports.

The global macroeconomic downturn, weakening demand, and the Federal Reserve’s interest rate hike have combined to make export data in other Asian countries and regions similarly ugly. In June 2023, China’s Taiwan exports fell 23% year-on-year, and South Korea’s exports fell 6%. Vietnam, which has a more similar industrial structure to Dongguan, saw its exports of mobile phones and accessories fall by 16% year-on-year in the first five months of this year.

Compared with other countries and regions in East Asia, Dongguan, as a veteran foreign trade city, has a well-established infrastructure and no shortage of skilled workers. Years of industrial manufacturing have given Dongguan the ability to produce new energy products, cars and related accessories, and they are one of the few industries in China that are still growing at a high rate. A landmark figure is that in the first quarter of this year, China’s car exports have surpassed Japan and become the world’s first. Whether for Dongguan or China’s manufacturing industry, this is a unique opportunity for transformation.

Dongguan should be glad that the global industrial reconstruction is still in the early stage, and there is still time to adjust and turn. But if Dongguan stands still, a generation from now the city’s streets will be nothing but dilapidated factories and past glories.