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The Future of China’s Manufacturing Industry

It is becoming more and more common to hear cries that China is becoming less competitive in its manufacturing industry and factories are moving overseas. Of course, rising cost of production and particularly that of labour doesn’t help. China’s average yearly wage in manufacturing has increase from RMB 15,757 in 2006 to RMB 46,431 in 2014, and is still increasing. The US has been the largest manufacturing nation since around the late 19th century or early 20th century. UK briefly held the number one title after replacing China in mid 19th century. What is the real state of manufacturing in China since surpassing the US in 2010? At that time, China’s share of world manufacturing was 19.8% ($2 trillion) compares to the US’s 19.4% ($1.94 trillion). However, the contrast is extremely great in the make up of the industry. China’s factories hire around 100 million workers compare to around 11.5 million for the US.

No country is immune to change in a globalized world. Firstly, there will always be movement of capital, personal across countries. Secondly, labor cost is not the most important factor where a factory is located. The latest manufacturing data obtained from UN shows that in 2013, China manufacturing industry stood at RMB 16,980,710,675,561 ($2.7 trillion) while US is at $2.03 trillion. Yes, there may be factories moving out of China to other regions but the same can be said for any large industrial countries. The reality on the ground is that China has been moving up the valur chain in its manufacturing industries. The number of workers in manufacturing will continue to go down, so will those of the developed industrialized nations. The reason is that labor intensive industries will move out but higher end industrial production will still stay or increase in places which has the necessary infrastructure and enterprise.

Another important factor is the increase of industrial robots in manufacturing. According to International Federation of Robotics the shipment of new industrial robot will have double digit growth between 2014 to 2017.

shipments_by_country

In their estimate by 2017, China would be the largest user or industrial robots numbering around 332,300.

stock_by_country

So is this an article trumpeting the prowess of China’s industrial capacity? Far from it, the figures actually shows the backwardness of China’s economy and industries compared to developed countries. If the total industrial output or robots is average among China huge population, China is not even in the top 20. What I am trying to say is China has a lot of catching up to do but luckily I see evidence of that. China would not be able to provide competitive economic freedom, environtment, health care and education to its enormous population if no proactive step is taken.

The naysayers will of course, say that all those increase in industrial capacity is bad, much like the ghost cities being built to boost GDP. China will simply buy those industrial robots or built things just so the economy doesn’t crash but will crash soon. What do you think?

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  1. N.M.Cheung
    May 24th, 2015 at 17:39 | #1

    As an article from Guancha.cn described, the total workers at Foxcon factory in Jiangsu province has declined from 11,000 to 6,000 in 5 years which manufacture IPhone because of the labor shortage and extensive use of industrial robots. The question of ghost cities were overstated, as the ghost city described in 60 Minutes report are now fully occupied. I think the Discovery Channel series on China visited that city. As for excess manufacturing capacity, China is pivoting to more green and energy efficient uses, plus all the investments like the Silk Road projects, Asian Investment Bank, and the recently concluded agreement to connect Atlantic seaboard in Brazil through Peru to Pacific will soak up all those excess capacities.

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