Stratfor has identified what they are calling the Post-China 16, or PC16 — the 16 countries best suited to succeed China as the world’s low-cost, export-oriented economy hub.

The Post-China 16

Indeed, China is at the fringes of its low-wage, high-growth era. Other countries will replace it. The international system opens the door to low-wage countries with appropriate infrastructure and sufficient order to do business. Low-wage countries seize the opportunity and climb upon the escalator of the international system, and with them come the political and business elite and the poor, for whom even the brutality of early industrialism is a relief.

But identifying these countries is difficult. Trade statistics won’t capture the shift until after it is well underway. In some of these countries, such as Vietnam and Indonesia, this shift has been taking place for several years.

In general, we are seeing a continual flow of companies leaving China, or choosing not to invest in China, and going to these countries. This flow is now quickening.

In looking at this historically, two markers showed themselves. One is a historical first step: garment and footwear manufacturing, a highly competitive area that demands low wages but provides work opportunities that the population, particularly women, understand in principle. A second marker is mobile phone assembly, which requires a work force that can master relatively simple operations. Price matters greatly in this ruthlessly competitive market.

I wonder how accurate mobile phone assembly is as a metric, as advanced robotics is making assembly line work more and more a thing of the past.

These are places that are at the beginning of their development cycle, and they may not develop successfully. Investors here are risk takers — otherwise they wouldn’t be here.

There is no single country that can replace China. Its size is staggering. That means that its successors will not be one country but several countries, most at roughly the same stage of development. Taken together, these countries have a total population of just over 1 billion people. We didn’t aim for that; we realized it after we selected the countries.

The new activity is focused on Africa, Asia and to a lesser extent, Latin America. When you look at the map, much of this new activity is focused in the Indian Ocean Basin. The most interesting pattern is in the eastern edge of Sub-Saharan Africa: Tanzania, Kenya, Uganda and Ethiopia. Sri Lanka, Indonesia, Myanmar and Bangladesh are directly on the Indian Ocean. The Indochinese countries and the Philippines are not on the Indian Ocean, and even though I don’t want to overstate the centrality of the Indian Ocean, they are nearby. At the very least we can say that there are two ocean basins, the Indian Ocean and the South China Sea.

There are some countries in Latin America: Peru, the Dominican Republic, Nicaragua and Mexico. A special word needs to be included on Mexico. The area north of Mexico City and south of the U.S. borderlands has been developing intensely in recent years. We normally would not include Mexico but the area in central-southern Mexico is large, populous and still relatively underdeveloped. It is in this area, which includes the states of Campeche, Veracruz, Chiapas and Yucatan, where we see the type of low-end development that fits our criteria.

Source: Stratfor Geopolitical Weekly

* Email
First Name
* = Required Field