Last 60 years: Tertiary sector expanded at the expense of agriculture and manufacturing (de-industrialization).
Reasons for Manufacturing Decline
People prefer to spend income on services rather than manufactured goods.
Fierce competition in the production of goods from countries like China, India, & Brazil.
As countries develop, the public sector (mostly services) grows.
Advances in technology: Employment in manufacturing falls as machines replace people.
Case Study: Hisense (China)
China is well-known for its manufacturing capabilities due to its cheap and large supply of labor.
Hisense is a large state-owned Chinese manufacturer of white goods, electrical goods, and related products.
Hisense also provides services such as product design, information technology services, and property management.
Hisense has opened two new research and development centers.
Changes in China's Economy:
Significant changes in the proportion of people employed across the primary, secondary, and tertiary sectors between 1990 and 2015.
1990: 60% in agriculture, 22% in the secondary sector, and 18% in the tertiary sector.
2015: 28.3% in agriculture, 29.3% in the secondary sector, and 42.4% in the tertiary sector.
China's Economy Becoming More Balanced:
Less dependence on agriculture in 2015 compared to 1990.
Potential for future imbalance as it becomes more dependent on services.
De-industrialization
Occurs in well-developed countries (e.g., USA, Germany, Japan, France).
Involves the decline of the manufacturing sector at the expense of the tertiary sector.
Many western-style economies have seen a sharp fall in manufacturing employment and a steady increase in services.
Causes of De-industrialization
Change in consumer demand: Shift towards spending on services rather than manufactured goods (e.g., holidays, restaurants).
Competition in manufacturing: Fierce competition from developing countries (e.g., India, China, Thailand, Brazil) with cheaper production costs.
Growth of the public sector: Public sector mainly provides services (e.g., education, transport, healthcare).
Advances in technology: Machines replace people in manufacturing, leading to a fall in employment.
Interdependence Between Sectors (Hisense Example)
Hisense may rely on retailers and other distributors to sell its manufactured goods to consumers.
Review Questions & Answers
Difference between secondary and tertiary production:
Secondary sector: Manufacturing and processing (conversion of raw materials into goods). Example: Hisense manufacturing white goods and electronic products.
Tertiary sector: Provision of services. Example: Hisense providing IT and design services.
Evidence of a more balanced Chinese economy since 1990:
Decrease in agricultural employment from 60% to 28.3%.
Increase in tertiary sector employment from 18% to 42.4%.
Increase in secondary sector employment from 22% to 29.3%.
Interdependence:
Cereal farmers (primary) rely on bakers (secondary) for wheat sales.
Bakers may depend on advertising agencies (tertiary).
The transport industry (tertiary) relies on the oil industry (primary) for fuel.
What is de-industrialisation?
The decline of the manufacturing sector and expansion of the tertiary sector