The trade war between China and the United States is having a negative impact on the cities of China, too. Many Chinese cities, which were solely dependent on manufacturing plants of foreign companies, are becoming ‘ghost towns’, as the companies shut down the plants.
China built unparalleled urban infrastructure- equipped its cities with airports, railway stations, highways, sustainable drainage infrastructure- and the cities equipped with infrastructure became engine of Chinese growth story. The foreign companies, which were looking cheap manufacturing destinations with proper infrastructure, made China ‘factory of the world’.
But as these companies started relocating the factories in other countries, these cities are becoming ghost towns. With the latest changes in China’s place in the global supply chain, the urban scenario of the country is also undergoing unprecedented transformation. And the smaller cities, which were solely dependent on the manufacturing plants for economic, social, and political activities, are at the receiving end of this transformation.
As per a report by South China Morning Post, with Samsung’s closure of Jinxinda complex in Huizhou city, the city which was flag bearer of China’s growth story became a ghost town. The Guangdong province on the coast of South China Sea, to which Huizhou city is a part of, became the manufacturing hub for the world. Fuelled with manufacturing plants, the economy of Guangdong province reached 1.47 trillion dollar – ranked independently it would be 11th largest economy in the world- in FY 2018.
But, as the foreign companies relocate their plants to countries like Vietnam and India, the shops which were dependent on the factory workers for revenue, are closing down. “Before the Samsung factory moved, our turnover could reach 60,000 yuan [US$8,500] or 70,000 yuan [US$9,900] a month, but now we can only earn a few hundred yuan a day, only two or three tables a night,” said a restaurant owner in Huizhou city.
With the closure of the Samsung plant, 60 per cent of the nearby business closed down. This phenomenon is not limited to Huizhou city, there are hundreds of cities in China which are solely dependent on manufacturing plants of foreign companies, the shops in these cities have closed down as the revenue dipped, and the people employed at the shops don’t know what to do with life.
This phenomenon is known as Detroit syndrome of cities. The city of Detroit in Northeastern United States, which was a major megapolis a few decades ago, became a ghost town with the closure of factories. In the United States, the syndrome was limited to neighbourhoods of Detroit, but in China, the syndrome has plagued hundreds of cities.
The ongoing trade war between the United States and China is plaguing the Chinese economy, but, Vietnam and India are bound to gain at the expense of the dragon. For example, as Samsung closed down the factory in Huizhou city, it opened a new factory in Noida, India, and increased the production in its Vietnamese factory.
A few months ago, Minister Nirmala Sitharaman said that since the MNCs exiting China are “definitely considering India as an option, it might be important for the government to now see and meet up with a lot of industry leaders and invite them to India.” It is clear from Finance Minister Sitharaman’s remarks that the Modi government understands fully well the kind of opportunity that the ongoing US-China trade tensions offer.
The American and even European and Japanese companies will have to look for new sources and avenues in the backdrop of the trade war. As the MNCs companies look beyond China in the face of the ongoing trade war, India is the most natural alternative given its encouraging economic growth rate in the recent past and also the fact that the size of India’s economy most closely resembling that of China, making it a perfect substitute.
Only India has the potential of matching the expansion needs triggered by the trade tensions between the US and China. It is a welcome development that the Modi government has already started thinking in the right direction, with the Finance Minister disclosing her plans for wooing MNCs exiting China.