Abstract
The paper aims to bring attention to the vital phenomenon of China’s factory relocation to Africa, with a special focus on Ethiopia and Rwanda. As such, the paper asks: can the surge in wages in China decisively lead to the relocation of labor-intensive manufacturing firms from China to Ethiopia and Rwanda on a scale substantially sufficient to kick-start their industrialization? In attempting to answer the question, the paper also attempts to find out if there can be any possible shift from Asian to African Geese formation within the context of flying geese (FG) theory of comparative advantage, a framework that is useful in understanding the concept of “catching-up economy”, relaying as the paper general analytical framework. The paper finds out that China’s factory relocation are still limited and constrained, owing to both African nations and China’s side factors.
Highlights
According to the old saying “Birds of a feather flock together”; so, too, do investors
Without putting in place this soft and hard infrastructure, low-wage developing nations like African nations might lose the opportunity of industrial upgrading and economic transformation. Realizing this great potential requires effective policy levers to put the right conditions in place. Based on this divergence views and by employing the FG theory of comparative advantage the paper asks: can we clarify the emergence of a Chinese manufacturing operation in the continent of Africa, with China as the “leading goose” and African economies as its “follower geese”? It is in this context we offer an overview of the flying geese theory, the paper general analytical framework
London18, few Chinese manufacturing firms are relocating abroad. If they are relocating abroad, for instance, Africa, is there a preferred destination? Notably, some Chinese entrepreneurs are already migrating to Ethiopia and Rwanda. If they are already in these African nations, it is in this context the remaining part of this paper focus on the relocation of light manufacturing firms from China to Ethiopia and Rwanda and find out if there can be any possible shift from Asian to African Geese formation
Summary
According to the old saying “Birds of a feather flock together”; so, too, do investors. As a result of this phenomenon, China will have to move the industrial ladder, like Japan did in the 1960s and Korea did in the 1980s –a “graduation” that will free up large manufacturing employment opportunities for lower-income economies, and mark China’s conversion from the flying goose it once was in the footsteps of other Asian economies into a leading dragon in its own right (Lin, 2012). More ‘mature’ firms in Eastern China, where manufacturing is concentrated and wages are higher are most likely to be among those that start to relocate (Hou et al 2017) These investments would be ‘resources-seeking’, as they aim to benefit from resources like labor and other inputs, which are available at lower costs in the host economies (Calabrese et al, 2017). The paper evaluation is that China will make an important contribution in backing the continent host economies to build desired infrastructure (mostly physical) and establish some labor-intensive factories in a small number of chosen host African economies, but that it will be a long way off to see the viable industrial shoots sprout for sustainable development in Africa
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