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Report: China losing manufacturing edge

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Fabricators & Manufacturers Association International Economic Analyst Chris Kuehl said China stands to lose manufacturing market share and would have no cost advantage compared to the U.S. by 2016. Kuehl reviewed his analysis of recent economic reports in the association’s newsletter Fabrinomics, according to a news release.

“Wages (in China) are growing at 17 percent annually, while in the U.S. they are growing at 3 percent,” Kuehl said in the release. “At the managerial levels and among skilled workers, the rate of Chinese wage growth is about 135 percent per year; in the U.S., that same group is seeing wage growth of 3.7 percent. The Chinese pay scale is still far less than in the U.S., but that gap is closing very fast.”

According to the Missouri Department of Economic Development, Missouri export sales increased 35 percent to nearly $13 billion in 2010 compared to 2009.

In a March Springfield Business Journal story, SRC Holdings Corp. CEO Jack Stack stated the importance of increased exporting in the states.

“I have a really strong belief that we are going to be seeing more in-sourcing in the United States,” he said. “We used to buy a lot of components from China, and China was doing a lot of the manufacturing and importing into here. I think we’re going to be importing those jobs back to America.”

Kuehl said that Chinese productivity has grown tenfold during the last 20 years, and today comprises 19.8 percent of the world’s manufacturing output. The U.S. is slightly behind with 19.4 percent of total manufacturing production, but the country is seeing productivity gains of almost 8 percent per year, according to Kuehl. His analysis concludes that Chinese manufacturers would not have a cost advantage over their U.S. competitors by the end of 2015.

“If, as expected, the Chinese are forced by inflation threats to start pushing the value of their currency higher, the balance could shift pretty quickly,” Kuehl said in the release. “Then, there is the potential for much higher transportation costs as the price of oil rises. None of this will cause the U.S. manufacturer to shed a tear.”

Kuehl said if China begins to turn its focus to its own domestic market and away from exports as is expected, U.S. manufacturers stand to gain.

“As the U.S. manufacturing (industry) looks to its own market, it will be generally better positioned than the Chinese competitor as the distribution infrastructure in the U.S. is better suited than China’s,” Kuehl said in the release, adding that China’s internal transportation systems are generally inferior to those in the U.S. “Japan looked unstoppable in the 1970s, and they faded over time. It now appears to be the beginning of China’s return to earth.”
Based in Rockford, Ill., the Fabricators & Manufacturers Association International is a professional organization that supports 2,100 members working in the metal forming and fabricating industry.[[In-content Ad]]


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