China to Lose Manufacturing Edge

Source: Staff

Jun 07, 2011

In 1990, China's share of world manufacturing output was a mere 3%. Today its share is 19.8%, slightly ahead of the U.S., which stands at 19.4%. But China likely will lose significant market share in the years to come, and no longer will have a cost advantage over U.S. manufacturing by 2016, according to predictions from Chris Kuehl, economic analyst for the Fabricators & Manufacturers Assn. (FMA,

"Such a statement would have evoked peals of laughter and derisive remarks only a few years ago, but times change and situations alter," Kuehl said. "There are no guarantees, of course, and these reports make it clear that idiotic policies can still ruin the trend."

Kuehl based his prediction on recent analyses and reports, noting that analysts are beginning to string together trends that point to better news for the U.S. than for China. "The Chinese built quickly on a base of low-wage workers and significant government assistance as well as a very low-valued currency that has allowed the growth of the export economy," he said. "The future is not looking so positive for the Chinese, however. Wages are growing at 17% annually, while in the U.S. they are growing at 3%." The Chinese salary is still much lower than in the U.S., he added, but the gap is closing quickly.