The promise of Chinese manufacturing moving to Africa increasingly seems like a real possibility. Chinese car factories assemble in South Africa. Mainland footwear companies have expanded into Ethiopia. Chinese entrepreneurs have opened textile plants in Rwanda and other operations across the continent.
But it may be too soon to proclaim Africa the world’s next factory. According to a new study by researchers at Peking University’s Center for New Structural Economics, few Chinese manufacturing firms are relocating as a result of rising wages in China. And if they are relocating overseas, Southeast Asia, rather than Africa is their preferred destination.
The most common response to rising wages was not relocating to countries with cheaper labor but turning to automation. Almost a third of firms said upgrading technology was their first strategy and more than half said it was among their top three responses. Chinese manufacturers are expected to have the world’s largest number of installed industrial robots (p. 29), about 600,000, by 2018, according to the Industrial Robot Statistics.
Only 6% of firms said relocation of production was their most likely response, and only half of those said they would relocate to areas outside of China. Among 62 firms that had invested abroad or planned to, only two named Africa as a preferred destination.