Here’s the key point from the piece looked over today; “..the US-China trade war may not be a turning point in the process of globalization but rather an opportunity for the reorganization of economic activities, both within and between countries.”
Researchers Fanghua Li, Liyuan Wang and Li Zhang from the University of New South Wales, the Renmin University of China and the Central University of Finance and Economics set out to test a hunch that following the first round of Trump tariffs Chinese businesses most affected (mainly coastal) may have moved inland to try and offset some of the effects.
China is fertile ground for such a study as the coastal areas have been developed so far in advance of the hinterland that changes in this dynamic should be quite easy to spot.
What made such a shift possible and likely was the high level of development China has fostered in these inland areas providing them with good infrastructure and a highly educated work force.
First, in the paper the research team demonstrate there was a notable shift in emphasis from firms located in coastal areas into the hinterland. Then, they set about testing theories as to what was propelling the move.
It seems a combination of a new focus on domestic market opportunities plus the benefit of lower input costs were the primary drivers.
This has led to a win-win for China Inc. Win #1 is that tariff affected companies suffered no overall losses or decreased Total Factor Productivity. Win #2 is that the hinterland is getting fresh development impetus that had, in recent years, stalled from the central government level.
So, not only have the Trump tariffs encouraged the development of a global China co-prosperity sphere as we learned from work featured last week, it seems they’ve also helped balance the domestic economy at no cost to affected firms.
China Inc. must therefore be pleased the architect of such beneficial developments will shortly re-grasp the reins of power. 🙂
You can access the work in full via this link Deglobalization as an Opportunity for the Hinterland.
Happy Sunday.