Abstract

Abstract：The difference of resource endowment or comparative advantage between different countries brings about the international division of labor and the international trade of goods and commodities.Since China's Reform and Opening-up，especially since China joined the World Trade Organization（WTO），along with the rapidly increasing in China's industrial products production and export capacity and energy imports expanded significantly，economic complementarities between China and Arab countries have further strengthened，the bilateral trade in goods between China and Arab Countries developed very rapidly and formed the trade structure of manufactured goods trade for oil，and the two sides also gradually become important trade partners.However，with the rapid development of China's industrial manufacturing industry，the continuous upgrading of industrial structure and rapid rise of labor costs，has led to the decline of international competitive advantages in some industrial manufacturing sectors.And as a result，the growth rate of China's export of goods to the Arab League and the EU has dropped significantly since 2014.And in the meantime，EU's imports in goods to itself and to Arab countries have grown rapidly.And this also puts forward realistic requirements for the transformation of China's economic and trade relations with Afghanistan from trade to investment.

Comparative advantage is an important basis for the development of industrial manufacturing industry and the comparative advantage or resource endowment of host country are also important reference factors for industrial capital to choose investment destination country.In terms of resource endowment or comparative advantage，Arab countries have huge demographic dividend in human resources，abundant supply potential of energy resources and superior international trade conditions，all of which constitute favorable conditions for the development of industrial manufacturing and China-Arab capacity cooperation in manufacturing industries.In addition，Arab countries attach great importance to the development of industrial manufacturing industry and Arab countries' expectation to promote the development of industrial manufacturing industry in Arab countries with the help of the Belt and Road Initiative，which also provides necessary policy guarantee for Arab countries to carry out international production capacity cooperation.However，as measured by outward direct investment（OFDI），an important carrier of international industrial transfer，China and Arab countries' international cooperation on production capacity in the field of industrial manufacturing is still at a relatively low level and has yet to make substantive progress.Due to the scale of China's direct investment in Arab countries still limited by volumes，and it is not dominated by industrial manufacturing.China also accounts for a very limited sharing of foreign direct investment in Arab countries.

The fact that implementation of production capacity cooperation between China and Arab countries in manufacturing industries has not made substantive progress，mainly because it is difficult for Chinese enterprises to take advantage of the favorable production conditions of Arab countries and enhance their competitiveness by making investment in Afghanistan.This is due to both macro-level obstacles and micro-level factors closely related to the investment in enterprise industrial parks.Firstly，from a macro perspective，Arab countries either have a poor business environment or have high domestic trade and investment barriers，leading Chinese Companies hard to embed into the local society when investing in Arab countries.In addition，due to the weak industrial manufacturing base in Arab countries，it is difficult for Chinese enterprises to obtain flexible and specialized production conditions in the host countries.At the enterprise level，as the industrial supply system of Arab countries is closely linked with the EU and far from China，the practical difficulties and increased costs that Chinese enterprises face in adjusting the supply of upstream products in Arab countries also weakens their enthusiasm for making investment decisions to some extent.As for the construction of overseas parks，China is at a competitive disadvantage compared with the industrial parks built by the host country in terms of location selection and layout，which makes it difficult for China to play its role as an incubator for Chinese enterprises investing in Arab countries.

The huge differences in economic development modes among Arab countries，as well as the highly uneven distribution of resources determines that when China carries out international production capacity cooperation with Arab countries，it must select and determine key cooperative countries and key industries according to the specific conditions of Arab countries.Firstly，in the labor-intensive manufacturing industries，although labor abundance and internationally competitive labor supply prices are indispensable factors for the development of relevant sectors，cultural and educational labor habits and other non-economic factors that are difficult to quantify will also have an important impact on labor productivity，and furthermore，the cultural and psychological distance between China and Arab countries further increase the enterprise management difficulties of local employees in China.Therefore，In the labor-intensive manufacturing industries，China should chose cooperation partners and industries according to the “product distance theory”，and select countries that have shown strong international competitiveness in the development of labor-intensive industrial manufacturing as key cooperation partners，and select manufacturing sectors that contain similar technological content to the advantageous products of the host country as key industrial sectors to promote.Secondly，in the capital-intensive industrial manufacturing sector，because the industry is highly sensitive to the power supply price，and the frequent international trade friction，China should choose countries with stable electricity，as well as signed free trade agreements with the European Union，as the key cooperation partners，and choose sectors frequently ecounter trade frictions as the key cooperation sectors.

Based on the characteristics of Arab countries' comparative advantage and competitive advantage，as well as the specific situation of China-Arab trade and investment cooperation，China and Arab countries can take the following steps to promote international production capacity cooperation in industrial and manufacturing industries：（1）determine key cooperative industries according to the adjustment of regional industrial chains；（2）determine key cooperative partners based on the resource endowment of the host country；（3）make the well developed industrial parks built by the host countries as the carrier of industrial incubation.In addition，to promote the optimization and upgrading of China-Arab cooperation on production capacity，the following strategies can be implemented：（1）take small and medium-sized enterprises as the spearhead for investment in Arab countries；（2）introduce large manufacturing projects with short value chains；（3）large enterprises should partner with local leading enterprises or industrial park when investing in manufacturing plants or industries zones；（4）cooperate with Arab financial institutions to set up an overseas financing platform for serving Chinese enterprises' overseas investment activities；（5）draw the vale chain between China and Arab Countries closer by supporting the development of Arab manufacturing enterprises；（6）an official bilateral cooperation mechanism will be established to facilitate Chinese enterprises' investment in Arab Countries.

Key words：China；Arab Countries；trade of goods；capacity cooperation in manufacturing industries