Struggling Foreign Small- and Medium-Sized Factories in Coastal China: Liquidate, Move, or Fly by Night?

Abstract

Since the mid-2000s, China has been transforming its industrial structure from a world sweatshop to a global manufacturing center. Many foreign small- and medium-sized factories that were engines of development in coastal China for the past two decades have recently been phased out due to the changing nature of macroeconomic policy, the labor market, and local interests. Unlike macroeconomic policy and the labor market, the subject of changing local interests has not been extensively investigated. This article explores an unclear political-economic logic and demonstrates the key counter-actions of the factories—legal liquidation, moving inland or to other countries, and illegal flight by night—in response to “phasing out” pressure from local politics. The micro-level struggles between foreign factories and local interests are indirectly conducive to China’s macro-level industrial transformation. This pattern will likely be repeated in China’s less-developed regions and other rapidly developing countries in the near future. This study is based on empirical data from fieldwork, primarily in Shandong province, from 2008 to 2016 as well as archival data from China, Korea, and other countries.