The PRD is exporting jobs but producing more goods for the home market

“THE GREAT CONVERGENCE”, a recent book by Richard Baldwin, argues that throughout most of the industrial era the know-how and culture essential for high-end manufacturing remained cloistered in the factories of the rich world. That led to a divergence between the fortunes of the West and the rest. But once the cost of communications started plunging, after 1990, such knowledge flowed more freely. Western multinationals built world-class factories in remote places, unpacking and outsourcing their manufacturing operations and supply chains.

China was one great beneficiary of this process. The developed world’s industrial knowledge and the PRD’s low wages created an unbeatable combination. Vast quantities of well-made but affordable goods were shipped from the delta’s factories to meet the seemingly insatiable appetites of the rich world. So the other great beneficiary of this axis of efficiency was the consumer in the West.