China manufacturing hub warns of offshoring, ‘hollowing out’ risks, eyes local investment

A prosperous city in one of China’s regional manufacturing powerhouse has underlined the need to retain investment locally to counter the rising momentum of offshoring, while also warning of the risks of “hollowing out.”

A report from Nanhu district in Jiaxing, a city in eastern China’s Zhejiang province, called for a holistic survey into flagship local enterprises about their investment intent.

It also urged for more precise and targeted support to encourage firms with overseas investment plans in the next three years to prioritise local development.

“In the short term, it is crucial to remain vigilant regarding the risk of leading enterprises relocating,” said the report published in the August issue of Zhejiang Economy, a magazine affiliated with the provincial Development and Reform Commission.

“Currently, key industries in Nanhu district have not yet formed complete industrial chains or upstream core drivers. Some sectors face a dominance by a single enterprise, making it difficult with the dual pressures of manufacturing investment outflows and capacity reductions from leading firms.

“Some new service industries in Nanhu are heavily dependent on related manufacturing sectors, and as both upstream and downstream industries contract, there is a pressing need to pay close attention to the dangers of industrial ‘hollowing out’.”