Skip to main content

China as the World’s Factory

  • Chapter
  • First Online:
The Chinese Birdcage

Abstract

Within a year of China’s accession to the World Trade Organization, the World Bank published an article under the headline “China Is Becoming the World’s Manufacturing Powerhouse.” Manufacturers ranging from General Electric to Samsung found out that it was often more profitable—and almost always far easier—to use China as an export base than selling goods inside the world’s most populous nation. Because of the combination of minuscule wages and the central planner’s deft hand, China in no time became the world's factory. China also began to build up massive foreign reserves, initially seen as a response to the 1997 Asian financial crisis but soon deemed excessive and looked upon conspicuously in the West.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 16.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    The World Bank Transition Newsletter, Vol. 13, No. 6, October–November–December 2002.

  2. 2.

    Report Wal-Mart Imports from China, Exports Ohio Jobs, 2004.

  3. 3.

    In terms of purchasing power parity (PPP), living standards in China in 1980 compared even worse with the USA, but only slightly so.

  4. 4.

    According to Orville Schell (1984), many Chinese had television sets by the early 1980s.

  5. 5.

    International Monetary Fund , WEO Database, October 2015.

  6. 6.

    Shaohua Chen and Martin Ravallion, “China is Poorer than we Thought, But No Less Successful in the Fight against Poverty,” World Bank , Policy Research Working Paper No. 4621, May 2008.

  7. 7.

    China Statistical Yearbook, multiple years.

  8. 8.

    OECD , Urban Policy Reviews: China 2015.

  9. 9.

    United Nations , World Urbanization Prospects: The 2014 Revision, July 2014.

  10. 10.

    In China, skyscrapers do not coexist with shanty towns, mainly thanks to the hukou (or household registration) system that regulates domestic migrant flows.

  11. 11.

    By 2015, China had all but eradicated urban poverty (preview of China Household Income Project 2016).

  12. 12.

    Dani Rodrik, “What’s So Special about China’s Exports?,” NBER Working Paper No. 11947, 2006.

  13. 13.

    Id.

  14. 14.

    “Suicides at Foxconn – Light and death,” The Economist , May 27, 2010.

  15. 15.

    Not adjusted for inflation. International Monetary Fund , WEO Database, October 2015.

  16. 16.

    Foreign exchange reserves officially only include foreign banknotes, foreign bank deposits, foreign treasury bills, and short- and long-term foreign government securities. However, often gold and SDRs are included as well.

  17. 17.

    China State Administration of Foreign Exchange (SAFE) .

  18. 18.

    Onno Wijnholds and Lars Søndergaard, “Reserve Accumulation – Objective or By-Product?” European Central Bank Occasional Paper Series No. 73/September 2007.

  19. 19.

    “Hot and hidden,” The Economist , January 16, 2014.

  20. 20.

    China also purchases US debt through financial centers like those in the U.K. and Hong Kong. Therefore the monthly data consequently understate China’s true purchases of US treasuries.

  21. 21.

    In a speech to the Peterson Institute for International Economics, Larry Summers in 2004 dubbed China’s massive holdings of US Treasuries and agencies’ bonds a “financial balance of terror.”

  22. 22.

    In June 2014, China’s foreign exchange reserves reached a peak of $4 trillion or a quarter of the world’s foreign reserves and a quarter of US GDP (World Bank).

  23. 23.

    Jiangyu Wang, “The Political Logic of Corporate Governance in China’s State-owned Enterprises,” Cornell International Law Journal, 631, 2014.

  24. 24.

    US regulators since then have blocked Huawei from two other acquisitions in the USA, and forced it to unravel its purchase of a defunct California cloud computing company.

  25. 25.

    Willem H. Buiter , “Taming Sovereign Wealth Funds in,” The Financial Times , July 22, 2007.

  26. 26.

    “Overseas Investors Buy Aggressively in USA.,” The New York Times , January 20, 2008.

  27. 27.

    The others are the Hong Kong’s SAFE Investment Company, the Hong Kong Exchange Fund, and the China’s National Social Security Fund.

  28. 28.

    As of the end of June 2015, China’s gold reserves were 1,658 tonnes (53.31 million fine troy ounces) according to the PBoC, ranking fifth in the world.

Author information

Authors and Affiliations

Authors

Copyright information

© 2016 The Author(s)

About this chapter

Cite this chapter

Mees, H. (2016). China as the World’s Factory. In: The Chinese Birdcage. Palgrave Macmillan, New York. https://doi.org/10.1057/978-1-137-58886-9_3

Download citation

  • DOI: https://doi.org/10.1057/978-1-137-58886-9_3

  • Published:

  • Publisher Name: Palgrave Macmillan, New York

  • Print ISBN: 978-1-137-58888-3

  • Online ISBN: 978-1-137-58886-9

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics