Chinese manufacturing has come a long way. Even though it is commonly mistaken for being just the world’s assembly line, it has been constantly innovating, fine tuning supply chains, accumulating human capital, increasing labor productivity to stay competitive despite rising wages. The Chinese government’s push in developing transport infrastructure has given it the benefit of reduced transaction costs. For example, China has 4 of the six biggest ports in the world. Despite low wages, most other countries where manufacturing is expected to go when it leaves China needs decades to build this kind of infrastructure.
High Labor Productivity:A simple hundred year old stylized fact in Economics, economies of scale. Labor productivity is still rising in double digits in China while other east Asian countries are still lingering around the productivity levels Chinese had in the 90’s.
Advanced Supply Chains:Chinese factoring are not assembly lines anymore. Most of the components of products China sells are manufactured in China itself. The supply chains that were in Korea and Japan when China’s manufacturing was in its nascent stage are now hoisted by China boosting the competitiveness of its factories.
Increased Automation: Chinese firms have started investing steadily in automating their manufacturing processes. Investing in automation is easy for Chinese factories with the smooth supply of credit by Chinese banks. Increasing automation by promoting import of machinery by way of reduced custom duties is one of the main priorities of the Chinese government in this five year plan.
The above major factors has made answer why manufacturing is seen as rising in China recent years.