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Published: February 25, 2013

 
 

Is China the World’s Next Rust Belt?

The eventual outcome will in no small measure be determined by the Chinese government itself. It must invest heavily in supply chain infrastructure and logistics to connect the interior to the rest of the country and to its current export hubs in particular—Shanghai, Shenzhen, and Tianjin. In addition, it must incentivize multinationals to relocate their activities to China’s interior regions instead of moving them abroad. At the same time, China must continue to upgrade its remaining manufacturing base, especially in so-called sunrise industries. Not surprisingly, this is exactly what the government’s most recent five-year plan calls for.

China’s transition from an emerging to a developed economy will undoubtedly be challenging. But the country has an enviable track record in successfully implementing its five-year plans, and the financial resources to override other considerations, if necessary. In fact, the U.S. should give serious thought to adopting a more coordinated industrial policy itself to encourage investment in domestic manufacturing. Otherwise, those Midwestern rust belts may very well stay right where they are.


Author Profile:

  • John Jullens is a partner with Booz & Company based in Shanghai. He co-leads the firm’s engineered products and services practice in Greater China. He blogs at www.johnjullens.com

 

 
 
 
 
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