from the editor's desk : China

Think you've got it bad? Be happy you aren't in China

Lee_Teschler — Wed, 11 Mar 2009 19:53:00 GMT

China might look a lot better than the U.S. right now for those affected by the drastic economic slow-down. After all, the Chinese government is stimulating the economy there in a way that will produce real jobs quickly, in contrast to the ineffective stimulus measures we are seeing here. But don't apply for your Chinese visa just yet. Listen to the words of Kerri Houston Toloczko, a Senor Analyst for the Alliance for American Manufacturing (AAM):

“Despite its meteoric rise to global economic dominance, China has build a high rise economy on a foundation of mud,” states Toloczko.

“As manufacturing facilities popped up rapidly over the last decade, China filled jobs by encouraging massive migration from outlying Chinese villages into burgeoning factory centers. But in their plan they forgot the needs of the workers themselves.”

In the last year, over 20 million Chinese migrant workers lost their jobs as over 125,000 factories closed. The government heavily subsidized the manufacturing build-up, which has now led to a phenomenon known as “runaway bosses.” As factory owners have no personal investment in their businesses, they are leaving town to disappear into China’s one million villages and among its 1.3B people without first paying wages to their now unemployed workers.

China has no social safety nets that cover unemployment, medical, or retirement benefits, people are desperate and angry, Toloczko says. “China is currently experiencing at least 1,000 demonstrations each day - some of them violent - in factory centers and in rural areas when laid off Chinese migrant workers return home and find no jobs there either.”

The AAM has been championing the idea that the U.S. gets a raw deal when trading with China, and Toloczko sees an opening on that score.

“Although the Chinese government is trying to cure its recession with a $586B stimulus plan, it is distracted by massive social unrest that we don’t have here in the U.S.,” Toloczko concludes. “China is paying the price for shallow growth, manufacturing substandard consumer products and ignoring its social problems. But America’s economy is wide and deep, and built on solid footing. As China pays the price for its economic aggression, this may be our chance to reinvigorate our production capacity and finally level the playing field for our manufacturers.”

Something to look forward to? China likely surpasses U.S. in manufacturing next year

Lee_Teschler — Wed, 13 Aug 2008 17:09:00 GMT

Well, it was bound to happen sometime the way things are going. Now it looks as though it will happen next year, according to this story from MarketWatch.com. Here is a link to the full story:

http://www.marketwatch.com/news/story/china-top-us-manufacturing-2009/story.aspx?guid={46448549-CE99-4D28-8325-9CB13812C55C}

China set to surpass U.S. as top manufacturer

NEW YORK (MarketWatch) -- China is forecast to surpass the United States as the world's leading manufacturer in nominal dollar terms next year, earlier than expected, as the U.S. economy slows down and China's continues to grow at unprecedented rates, according to consulting firm Global Insight.

The nominal value of U.S. manufacturing weakened somewhat sharply in 2007, and despite the outlook for modest recovery in the coming years, China will likely gain the largest share in global manufacturing as early as 2009, Global Insight said in a report released Tuesday.

"The basic reason [for China closing the gap] is that growth in the U.S. economy has essentially been zero over the last year and will continue to struggle over the next year," said Nariman Behravesh, chief economist at Global Insight.

"We know that China is a big manufacturing giant now," Behravesh said in an interview with MarketWatch. "What this study suggests is that it will continue to play an increasingly larger role" in the world economy.

Measured in real value-added terms, China's share in global manufacturing is forecast to overtake that of the U.S. by 2016-2017, boosted by rapid gains in market share of textiles, basic metals, computer equipment and mineral product manufacturing, according to Global Insight.

However, the U.S. will continue to lead in certain high-value industries, such as aerospace, pharmaceuticals and specialized equipment.

The manufacturing sector accounts for only 12.5% of gross domestic product in the U.S., while it makes up 36% of the Chinese economy. Manufacturing as a share of the U.S. economy has been declining for decades, with the service sector enjoying a much more dominant role.

Why Chinese exports are becoming more sophisticated -- not just because of outsourcing

Lee_Teschler — Mon, 25 Feb 2008 12:55:00 GMT

Well, it's not just because of outsourcing from big companies, at least according to this research paper by a couple of economists.

What Accounts for the Rising Sophistication of China's Exports?

> by Zhi Wang, Shang-Jin Wei - #13771 (ITI)

> Abstract:

> Chinese exports have become increasingly sophisticated. This has

> generated anxiety in developed countries as competitive pressure may

> increasingly be felt outside labor-intensive industries. Using

> product-level data on exports from different cities within China, this

> paper investigates the contributing factors to China's rising export

> sophistication. Somewhat surprisingly, neither processing trade nor

> foreign invested firms are found to play an important role in

> generating the increased overlap between Chinaâ?Ts export structure

> and that of high-income countries. Instead, improvement in human

> capital and government policies in the form of tax-favored high-tech

> zones appear to be the key to the country's evolving export structure.

> On the other hand, processing trade, foreign invested firms, and

> government-sponsored high-tech zones all have contributed

> significantly to raising the unit values of Chinese exports within a

> given product category.

> http://papers.nber.org/papers/W13771