The Next Factory of the World | Irene Yuan Sun

Summary of: The Next Factory of the World: How Chinese Investment Is Reshaping Africa
By: Irene Yuan Sun

Introduction

Discover the fascinating world of Chinese investment in Africa and how it is reshaping the continent’s economic landscape in Irene Yuan Sun’s insightful book ‘The Next Factory of the World: How Chinese Investment Is Reshaping Africa’. Delve into Sun’s unique perspective on the growing number of Chinese companies investing in African factories, the potential of Africa becoming the next global manufacturing hub, and the challenges and risks presented by this expansion. Through compelling case studies, understand the critical role manufacturing jobs play in enabling millions of people to escape poverty and the way it stimulates job creation in other sectors.

Africa’s Economic Uprising

Irene Yuan Sun argues that Chinese manufacturing investment in Africa can provide a pathway out of poverty for millions of people. McKinsey & Company’s research report shows that over 1,500 Chinese companies had invested in factories in Africa by 2017. Sun believes that the West’s development programs cannot achieve the same economic leverage as manufacturing. Factory jobs create a ripple effect that leads to other jobs in the service sector, such as restaurants, construction, and medical care, thus empowering 100 million people to collect paychecks and lifting 500 million out of poverty. African nations like Nigeria, Lesotho, and Ethiopia are benefiting from the economic impact of Chinese manufacturing companies.

China and Africa’s Manufacturing Industry

China’s rapid industrial growth has shifted investors’ focus to Africa as the next factory of the world. With China’s subsequent outward turn, African countries offer capital-intensive manufacturing opportunities with cheap labor and high potential returns. Despite Africa’s past struggles with poverty, violence, and corruption, Chinese investors are encouraged by the lack of competition. Successful African factories like the Formosa mill in Lesotho employ thousands and supply big brands like Levi’s and Old Navy. While there are challenges to investing in Africa, China’s investment plays a significant role in driving the manufacturing industry in the continent.

The Future of Manufacturing in Africa

In contrast to the developed world, Africa’s labor market remains cheaper than automation. The fear of robots overtaking manufacturing work remains unwarranted in Africa since there won’t be any incentive to reduce labor costs. For instance, in Mrs. Shen’s factory, her employees’ intricate work is robot-proof as her workers cut and sew cloth pieces according to specific instructions. Apparel companies often alter their cuts and styles, making it more expensive and challenging to reprogram robots than to give human workers new commands.

Manufacturing in Africa at Exchange Rate’s Mercy

Africa’s developing countries face a risk to their manufacturing industries, as exchange rates remain a significant concern. The foreign currencies received from customers are not always in sync with the local currency used to pay workers, leading to a make or break situation. A depreciating currency may enhance profits, but its opposite can hurt. Such a scenario tends to have a devastating impact on developing economies and jobs. Dependence solely on exchange rates as an economic development strategy is not sustainable, leading to factory closures and loss of employment opportunities.

The Vanishing Nigerian Textile Industry

In the late 1980s, Nigeria’s textile industry was a major employer with 200 firms. However, by 2010, the sector had disappeared, resulting in millions of job losses and poverty in factory towns. This trend is not unique to Nigeria, as other countries such as Ghana and Tanzania also experienced a decline in their manufacturing industries. Once factories start disappearing, it is difficult to reverse the trend, and the impact on local economies can be devastating.

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