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China outsourcing manufacturing lines to Africa

Editor: Li Kun 丨CCTV.com

08-12-2016 14:20 BJT

By Miroslav Atanasov, Ph.D. Renmin University of China
Traditionally, the United Stated has used China, East Asia, and other overseas destinations for outsourcing industries. Many Americans feel unhappy, since millions of Americans had lost their jobs on account of cheaper labor costs abroad.

Nevertheless, Chinese companies have begun to outsource at cheaper labor destinations, while increasing industrial production output in important economic sectors, such as textile, electronics, and car assembling, especially in East Africa.

Deputy China International Trade Representative Zhang Xiangchen said Beijing has launched construction of industrial parks to create thousands of new jobs in Ethiopia, Egypt, and Zambia.

As its financial support rises, China believes a deepening partnership between Chinese and African firms would help the continent become more self-sufficient.

Zhang said to a gathering of Chinese and African business leaders at the FOCAC (Forum of China-Africa Cooperation) meeting in Johannesburg, South Africa last year that businesses should engage in more bilateral cooperation agreements.

A plan was devised to introduce new projects for joint investments. The cooperation would focus on Chinese investors financing projects across Africa and strengthen cooperation in the manufacturing sector.

Beijing has pledged to support Chinese firms that invest in special economic zones in Africa. "We want to use new financial facilities to promote our cooperation," said Zhang.

Zhang added, "We would want to make this economic cooperation with Africa more efficient." Accordingly, over 3,000 Chinese companies have invested US$2.7 billion in Africa to create more than 600,000 jobs.

World clothing manufacturers have transferred production away from China due to rising wages at home. The textile industry might soon be departing Asia and headed for African countries, according to Guang Z. Chen of the World Bank responsible for East Africa.

Chinese workers would continue to do more sophisticated production while basic cutting and sewing will take place in countries offering lower wages.

The transition is already in process. VF has placed its pants sewing facilities in Africa. Calvin Klein and Tommy Hilfiger's parent company - PVH Corporation - has clothes made in Kenya for the past several years. Other groups outsourcing to sub-Saharan Africa are Wal-Mart, J.C. Penney's, and Levi Strauss. 

Ethiopia has been identified as a leading destination for apparel production outsourcing, as disclosed in a recent survey among top executives - responsible for supplying about $US70 billion of goods annually. Ethiopia was the first African country mentioned alongside Bangladesh, Vietnam and Myanmar.

According to factory owners and brands spokespeople, Ethiopia has the most promising potential for garment production in Africa.   Investors from China, India, Turkey, even Sri Lanka and Bangladesh are flocking to Ethiopia, said Fassil Tadesse, president of Ethiopian Textile and Garment Manufacturers Association.

The country is well-known for its low cost of labor, low taxes, and cheaper energy bills. Another key advantage would be that it's one of the few countries where production lines can go from fiber to factory all in one place.

Huajian Shoes hired over 3,500 workers in Ethiopia to manufacture more than two million pairs of shoes annually. Mr. Zhang Huarong, president of the company, said, "Ethiopia is exactly like China was 30 years ago - poor transportation infrastructure and lots of jobless people."

Chinese investors have also constructed an industrial park in Dukem, near Addis Ababa, Ethiopia's capital, to host 80 textile firms and factories producing leather and construction materials. The industrial parks have created 40,000 jobs, responsible for assembling cars, trucks, and construction equipment.

Yet, this type of outsourcing causes logistical challenges such as insufficient supply of electrical power, or lack of infrastructure. Many African countries do not have good roads for the transport of finished clothing.

Ethiopia is landlocked and without a sea port. The workforce in Africa often lacks sufficient training in sewing clothes. So clothing exports out of sub-Saharan Africa account for about 1% of global output.

Meanwhile, there are plenty of opportunities here. The average manufacturing wage in China is 15 times higher than in Ethiopia.  Taking advantage of cheaper labor can bring faster economic growth to Africa. China stands as Africa's largest trading partner while more investment opportunities stand likely to steadily grow.

 Miroslav Atanasov, Ph.D. Renmin University of China


( The opinions expressed here do not necessarily reflect the opinions of Panview or CCTV.com. )



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Panview offers an alternative angle on China and the rest of the world through the analyses and opinions of experts. We also welcome outside submissions, so feel free to send in your own editorials to "globalopinion@vip.cntv.cn" for consideration.


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