China industrial giant

China: The rise of an industrial giant

China has been dubbed ‘the new workshop of the world’. Chinese steel production in 2003 was thought to be 20% of total world output. China makes 60% of the world’s bicycles and 50% of the world’s shoes. One-fifth of all garments exported were Chinese and this is expected to rise to 50% in 2012. Between 2000 and 2006, cloth manufacture more than doubled and car production increased by more than six times, while mobile phone ownership increase nine times.
Reasons for growth
Government legislation

The Chinese government sought foreign investment to help end China’s isolation and stimulate economic growth. Special Economic Zones (SEZs) were set up to encourage businesses into China. They often had advanced factories set up in the zones and tax incentives such as reduced tax rates were used to attract more businesses. The one-child
policy, which was introduced in 1979, meant that the population level was much lower than it would have been (estimated at over 2 billion) and people’s desires changed. There was an increased demand for electrical household goods, air conditioning, cars and computers.

The home market

China’s large and increasingly wealthy population – per capita income in urban households was about £600 in 2001, having risen from below £200 in 1993 – offer much potential, as do other Asian Pacific areas. China’s ambitious urban population numbers some 500 million people. More people who have more money means they can buy more things which a greater demand for Chinese products so industry makes more products.

The Olympic factor

The 2008 Olympics were held in Beijing. This provided China with the perfect opportunity to showcase the nation. The opening ceremony, based on the theme ‘One World, One Dream’, was important in an attempt to convey China as an open, friendly country and an important, integrated, positive part of the world in the 21st century. The prestige of hosting the games and the image portrayed will be immensely important in stimulating further foreign investment.

The Three Gorges Dam

Industrial Development on a large scale demands large resources of energy. China currently generates two-thirds of its electricity from coal-fired power stations. Many new plants are being built. Hydroelectric power (HEP) accounted for 7% of electricity in 2006. China produces more HEP than any other country in the world and is keen to develop new sources of energy. The Three Gorges Dam is the biggest in the world, generating 22,500mW when fully operational. Together with the development of navigation along with the Yangtze, the dam has led to much development.

Other factors

Cheap labour is a key reason – wages are 95% lower than in the USA. This means TNCs will have lower costs and therefore greater profits, which makes China a more attractive
place to locate a factory in.