Turkish economic crisis shows value of maintaining a competitive industrial sector

What enlightenment can the Turkish lira crisis offer for China and other emerging economies? Amid global uncertainties, the hollowing out of its industrial sectors makes Turkey vulnerable to external economic pressures and challenges.

As China reduces its focus on manufacturing and attempts to restructure its economy toward a more consumption and services-driven model that helps guarantee sustainable growth, there may be the same problem: de-industrialization makes the Chinese economy more vulnerable to external uncertainties.

Preparing for a protracted trade conflict with the US, China has to make timely finetuning adjustments of its established economic strategies. Guangdong, a leading industrial province of China, recently released a plan aiming to rekindle the growth of industrial investment that focuses on strategic and emerging industries.

The plan can be used nationally as a response to the trade conflict started by the US because industrial upgrading can help China develop greater economic endurance against external attacks.

The Turkish lira crisis comes as a warning to emerging countries that are dealing with economic attacks amid this round of US protectionism. Internal problems are the main cause of Turkey’s financial crisis, while external factors also weigh on its economy.

Turkey has in recent years been one of the world’s fastestgrowing economies, but the development of the industrial sector has lost momentum. According to the US Central Intelligence Agency, 61.4 percent of Turkey’s GDP came from the services sector in 2017, while industry contributed only 31.8 percent.

Turkey’s economic woes worsened after US President Donald Trump announced new tariffs on Turkish steel and aluminum. Panic in the financial market is likely to lead to a contraction in capital inflows, which may put further pressure on Turkey’s currency. Without a competitive industrial sector, Turkey’s economy is extremely fragile in the face of external attacks.

Measures to encourage manufacturing expansion would help Turkey diversify its growth model and lay a solid foundation for economic success. Amid escalating trade tensions, Turkey’s problems offer a lesson to other emerging countries, including China.

The author is a reporter with the Global Times. bizopinion@ globaltimes.com.cn