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A materials flow chart of Stegman Tool Company, Inc., Troy, Michigan.
China became the world's biggest manufacturer in
2010, overtaking the US which had held the crown since 1895.
US consultancy IHS Global Insight estimated that
in 2010, China accounted for 19.8% of global manufacturing output, compared with
the US share of 19.4%.
China was the world's biggest manufacturer until
it was overtaken by Britain in 1850 and then the US became the dominant
manufacturer from 1895.
In 2000, the advanced countries in Western
Europe, North America and Japan, accounted for 72% of global manufacturing
output, down from 80% in 1990. By 2010, the wealthy nations accounted for a
little more than half of world goods production. The BRIC countries (Brazil,
Russia, India and China) accounted for just over a quarter of the total, up from
11% in 2000.
China's share of factory output was 6.9% of total
manufacturing in 2000; its share has tripled in a decade.
The US with 11.5m workers is hugely more
productive than China which has 100m employed in the same sector.
China's manufacturing base is skewed towards a
dependency on cheaper goods in such sectors as textiles, apparel, appliances, as
well as certain commodities. Textile, apparel and appliances together make up
25% of Chinese manufacturing, compared to 13% in the United States.
The US manufacturing base is dominated by sectors such as aircraft, special
industrial machinery, medical and scientific equipment and media-related
industries, including software.
China's electronics sector is dominated by foreign-owned firms.
In 2010, the UK slipped 2 places behind France, which was in 7th place in terms of global share. According to the league table, Italy was in fifth position and Brazil in the sixth rank,
with China, the US, Japan and Germany in the top four slots.
In the US, services overtook goods as the dominant sector in the economy in 1958
and now accounts for almost 70% of economic output.
Last September, Xi Jinping, Chinese vice-president and the heir apparent to Hu
Jintao, said foreign-invested enterprises accounted for 22% of tax revenues, 28%
of added industrial value, 55% of foreign trade and 45m jobs in China.
report published last month says China’s economic development as measured by
its gross domestic product is still sustained primarily by industry. Exports and
investment deliver the bulk of growth - - and have done so for the past four
decades. However, services have become steadily more important since the 1980s,
bringing their share of economic output close to that of the secondary sector.
Man. Output ($bn)
Change on 2009 (%)
Share of world
manufacturing output (%)
Total for 4 countries
manufacturing league table
Source: IHS Global Insight
Also last month, Mark Perry, a professor of
economics at the University of Michigan, Flint - - a key automotive
manufacturing centre, said in
The Wall Street Journal (via blog post) that taken on its own, US
manufacturing would rank today as the sixth largest economy in the world, just
behind France and ahead of the United Kingdom, Italy and Brazil.
Prof. Perry said: "Our world-class agriculture sector provides a great model
for how to think about the evolution of US manufacturing. The US produces more
agricultural output today—with only 2.6% of our work force involved in farming -
- than we did 100 years ago, when farming jobs represented almost 40% of the
labor force. Likewise, we're able to produce twice as much manufacturing output
today as in the 1970s, with about seven million fewer workers. That means
yesterday's farmhands and plant workers can become today's computer engineers,
medical doctors and financial managers."
Deborah Wince-Smith, the
president and CEO of the Washington DC-based
business group, the Council on Competitiveness, told
a House Energy & Commerce Subcommittee in early
March that the multiplier effect of American
manufacturing makes it the cornerstone of any robust
manufacturing sector is a key engine of innovation,
wealth generation, job growth and national
security,” Wince-Smith said. “America cannot
retain its position of leadership in the global
marketplace without a robust and vibrant industrial
The Council’s chief
executive also articulated the vision of America’s
leading CEOs on the path to manufacturing
competitiveness, found in the Council’s most recent
Ignite 1.0. The report features specific
recommendations from over three dozen chief
executives on a broad set of topics that include
energy policy, capital costs and US education in
science and technology.
is the first in a three-part series to be released
by the Council’s flagship
US Manufacturing Competitiveness Initiative (USMCI).
The initiative will draw insights from university
presidents and labor leaders in the second and third
installments in the series. The USMCI is focused on
developing a comprehensive National Manufacturing
Strategy to deliver to Congress and the
Administration at a national summit in December
Meanwhile, the US Business and Industry Council said in
a recent report (pdf) that migration of prime contractors overseas
inexorably pulls much of their supply chains with them. The export of
blue-collar production work leads to the export of white-collar
manufacturing-related work, as companies seek the advantages of locating
researchers and designers near the factories they service.
In fact, there is a continuous feed-back loop between R&D
efforts and the factory floor, with the two functions, R&D and production,
operating in tandem. And the report says as is well documented, R&D and other
technology work often produce a clustering effect, which draws labs and similar
facilities from other industries in search of new synergies. The notion that the
United States will retain high-end design functions while letting production
migrate overseas is wishful thinking. Without major globalization policy
changes, this vicious cycle of manufacturing flight cannot be turned into a
virtuous cycle of manufacturing resurgence.
The report says that the United States should focus any new trade agreements
on high-income countries capable of serving as final consumers of US exports.
Washington’s recent focus on third world countries capable of serving only as
re-export platforms has been a substantial contributor to today’s current trade
deficits. In particular, the United States should seek a free trade agreement
with Europe that excludes agriculture. Washington should also take stronger
measures to open Japanese and Korean markets, including unilateral tariffs if
Charlie Szews, Oshkosh Corporation CEO discusses the state of employment in the US manufacturing sector:
Data from the US-China Business Council reveal
how in nine years the amount of goods imported from China has tripled in size.
In 2000 the value of goods imported was at $100bn
but by 2009 that figure was at $296bn. In comparison the US exported $69bn worth
of goods to China.
China's Trade with the United States ($ billion)
exports reported on FOB basis; imports on a general customs
value, CIF basis
Source: US International Trade Commission
The Re-emergence of China
According to the late
eminent economic historian,
Angus Maddison (1826-2010),
until 1800, about three fifths of the world’s commerce and production took place
in and around China and India. So did much of the world’s scientific and
technological progress, including the Chinese invention of paper, explosives,
and printing, and medieval India’s launch of modern mathematics. In the early
1830s, when President Andrew Jackson sent the first US envoy across the Pacific
to Siam (Thailand), Asia still accounted for over half of global GDP (gross
It's important to
understand that the current post-Mao Zedong modernisation of China, is not a
simple story of a backward country achieving an economic miracle. A vast unified
country over a span of two thousand years, overwhelmingly dominated by one
ethnic group, the Han, was a pioneer in bureaucratic modes of governance.
Maddison says that in the tenth century, it was already recruiting
professionally trained public servants on a meritocratic basis. The economic
impact of the bureaucracy was very positive for agriculture
They nurtured it with
hydraulic works; printing enabled the distribution of illustrated agricultural
handbooks; farmers settled in promising new regions; a public granary system to
mitigate famines was established. They fostered innovation by introducing early
ripening seeds which permitted double or triple cropping. New crops were
introduced - - tea in the T’ang dynasty, cotton in the Sung, sorghum in the
Yuan, and new world crops such as maize, potatoes, sweet potatoes, peanuts and
tobacco in the Ming.
From the nineteenth
century, internal rebellions and colonial intrusions resulted in China's share
of world output falling from one third in 1820 to one twentieth by 1952. Its
real per capita income fell from 90% to less than a quarter of the world
average. Nineteen foreign powers established colonial enclaves; three wars were
fought with Japan and two with France and the UK, the Boxer rebellion in 1900
involved action with an international force including Americans from their new
colony of the Philippine Islands; Russia seized 10% of Chinese territory in the
1850s in what is now Eastern Siberia and in the first years of the Chinese
republic from 1912, it helped detach Outer Mongolia. After all these foreign
wars, the victorious powers exacted large financial indemnities.
Professor Maddison, a
British-born economic historian with a compulsion for quantification, spent many
of his 83 years calculating the size of economies over the last three
millenniums. In one study he estimated the size of the world economy in AD 1 as
about one five-hundredth of what it was in 2008.
In his research, he sought to
reconstruct thousands of years’ of economic data, in particular in his 2007 book
“Contours of the World Economy 1-2030 AD.”He claimed that per capita
income around the globe had remained largely stagnant from about 1000 to 1820,
after which the world became exponentially richer and life expectancies surged.
In another influential book,
Economic Performance in the Long Run,” in 1998, he tracked the history
of Chinese growth since 960. The book demonstrated that China’s recent rise was
merely a return to economic superpowerdom, as the Middle Kingdom had already
dominated the world economy for many centuries.