Reviving manufacturing4 min read . Updated: 01 Dec 2009, 09:01 PM IST
In my last column I had tried to explain how China’s manufacturing boom and export surge was in large part a result of the subsidization of producers through cheap capital, low wages and disciplined labour, combined with the latest technology brought in by foreign direct investment. I had not mentioned the role of the Chinese armed forces and local governments. The People’s Liberation Army (PLA) regularly places orders on emerging domestic enterprises to generate economies of scale and be globally competitive. They also transfer technology to these firms. Local governments acquire land for both domestic and foreign enterprises and often contribute the proceeds as equity capital, thereby becoming partners and assuring the investors against any future political risk.