Long Read: Are Chinese Industries at Risk of Hollowing Out?

A new wave of overseas expansion is fueling fresh concerns that industrial relocation could trigger higher unemployment at home over the medium to long term

While the relocation of some Chinese industries overseas since 2010 has led to declines in the country’s global share of certain exports, a new wave of overseas expansion in recent years has raised concerns about its impact on unemployment in some sectors.

In my view, there is no need to be overly worried about the risks of industrial relocation in the short term, as overall the impact is manageable. China is undergoing an industrial upgrade and transformation as its cost advantage declines.

However, from a medium- to long-term perspective, attention should be paid to three risks.

First, the risk of rapid deceleration in manufacturing growth, leading to a hollowing-out of industries — a process where key industrial elements, such as highly skilled jobs, core competencies, or production capacity, are lost or significantly diminished over time.

There is also the risk of macroeconomic volatility stemming from rapid industrial relocation.

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