Bounce back

A mod­er­ate re­bound of the eco­nomic sit­u­a­tion may be led by the im­prov­ing per­for­mance of com­pa­nies in eastern coastal ar­eas, a Chi­nese econ­o­mist said.

China Daily (Hong Kong) - - FRONT PAGE - By YAO JING yao­jing@chi­nadaily.com.cn

The resur­gent com­pet­i­tive­ness of United States man­u­fac­tur­ers ap­pears to bol­ster that na­tion’s po­si­tion in the global ex­port mar­ket and may re­shape the world’s trade map.

That is the view of a global con­sult­ing group. But ex­perts said the strength of Chi­nese man­u­fac­tur­ing ex­ports is not nec­es­sar­ily be­ing dam­aged de­spite the US’ shrink­ing trade deficit on fac­tory goods.

US ex­ports have been grow­ing more than seven times faster than the na­tion’s gross do­mes­tic prod­uct since 2005. Ex­ports are at their high­est point in 50 years, ac­cord­ing to the re­port by the Bos­ton Con­sult­ing Group re­leased on Wed­nes­day.

The re­port sug­gests the US is steadily be­com­ing one of the low­est-cost coun­tries for man­u­fac­tur­ing in the de­vel­oped world, driven by the price of la­bor, nat­u­ral gas and elec­tric­ity.

BCG projects the US, as a re­sult of its in­creas­ing com­pet­i­tive­ness in man­u­fac­tur­ing, will cap­ture $70 bil­lion to $ 115 bil­lion in an­nual ex­ports from other na­tions by the end of the decade.

By 2020, higher US ex­ports, com­bined with pro­duc­tion work that will likely be “reshored” from China, could cre­ate 2.5 mil­lion to 5 mil­lion US fac­tory and ser­vice jobs as­so­ci­ated with in­creased man­u­fac­tur­ing, said the re­port.

Cur­rently, China’s once over­whelm­ing pro­duc­tion­cost ad­van­tage is erod­ing be­cause of higher wages and other fac­tors be­hind the slower eco­nomic growth.

How­ever, it ques­tions whether the re­viv­ing US man­u­fac­tur­ing will dom­i­nate the man­u­fac­tur­ing pow­er­house China rep­re­sents and change the China-US trade re­la­tion­ship in a short time.

The to­tal China-US trade rose 5.6 per­cent to $244 bil­lion in the first half of this year. China im­ports from the US amounted to $75.75 bil­lion, up 15 per­cent from the same pe­riod in 2012, while China ex­ports to the US were $168 bil­lion, an in­crease of 1.8 per­cent, ac­cord­ing to the Min­istry of Com­merce.

China’s trade sur­plus with the US de­clined 7 per­cent in the pe­riod com­pared with the first half of 2012.

None­the­less, for the past sev­eral years, the US trade deficit with China has been sig­nif­i­cantly larger than that of any other US trad­ing part­ner or trad­ing group, ac­cord­ing to a re­port re­leased by the US Con­gres­sional Re­search Ser­vice.

Ma­jor US ex­ports to China in­clude oilseeds and grains, waste and scrap, aero­space prod­ucts and parts, as well as mo­tor ve­hi­cles. Top US im­ports from China are com­puter equip­ment, com­mu­ni­ca­tions equip­ment, mis­cel­la­neous man­u­fac­tured com­modi­ties and ap­parel, ac­cord­ing to the Con­gres­sional Re­search Ser­vice.

The US ex­port surge will be felt across a wide range of US in­dus­tries. The most pro­found im­pact will likely be on in­dus­trial groups that ac­count for the bulk of global trade, such as trans­porta­tion equip­ment, chem­i­cals, ma­chin­ery and com­puter and elec­tronic prod­ucts, BCG said.

When it comes to the emer­gence of a chal­lenger for China ex­porters, ex­perts said the back­flow into US man­u­fac­tur­ing is limited in sev­eral sec­tors. To fur­ther boost Chi­nese man­u­fac­tur­ers, they have to con­tinue im­prov­ing their in­no­va­tive ca­pa­bil­i­ties to lower costs and build brands.

“The US trans­porta­tion equip­ment, ma­chin­ery, com­puter and elec­tronic prod­ucts are mainly ex­ported to Euro­pean coun­tries and Ja­pan, not China,” said He Wei­wen, co-di­rec­tor of the China-US/Euro­pean Union Study Cen­ter at the China As­so­ci­a­tion of In­ter­na­tional Trade.

“The US man­u­fac­tur­ing in­dus­try has been re­cov­er­ing in re­cent years be­cause of its eco­nomic im­prove­ment and the changes in the global in­dus­trial chain di­vi­sion. But it will not threaten China’s ex­ports in terms of la­bor in­ten­sive in­dus­try, such as tex­tiles and fur­ni­ture,” said He.

As for com­mu­ni­ca­tions equip­ment, some com­pa­nies may move their man­u­fac­tur­ing plants back to the US. “But this is only a part of Chi­nese ex­ports to the US,” said He.

Fur­ther, bet­ting on the promis­ing Chi­nese mar­ket, com­pa­nies will choose to lo­cate their plants in China and in­vest more in China, added He.

Wang Li, an ex­pert at the Chi­nese Acad­emy of In­ter­na­tional Trade and Eco­nomic Co­op­er­a­tion, a govern­ment think tank, said: “Al­though the trad­ing fig­ures be­tween the two coun­tries may fluc­tu­ate, there will be only a lit­tle change in the bi­lat­eral trad­ing re­la­tion­ship. The de­clin­ing China trade sur­plus with the US re­cently is mainly be­cause of the ap­pre­ci­a­tion of the yuan and the weaker dol­lar. Right now, the US is at­tract­ing for­eign in­vest­ment and man­u­fac­tur­ing is con­se­quently pulled up, but not many com­pa­nies will rush back into the US now.”

How­ever, it is a fact that some com­pa­nies used to ex­pand­ing man­u­fac­tur­ing in China are trans­fer­ring to neigh­bor­ing coun­tries, such as Viet­nam and Myan­mar, to re­duce their ex­pen­di­ture be­cause China has lost the ad­van­tage of low pro­duc­tion costs.

“But af­ter count­ing in qual­ity, tech­nol­ogy and added value, Chi­nese man­u­fac­tures are still very pop­u­lar around the world and the la­bor costs in China are cheaper com­pared with in the US,” said Wang.

Nev­er­the­less, Wang said with the up­grad­ing and re­struc­tur­ing of ex­ports, Chi­nese man­u­fac­tur­ers have to fur­ther im­prove their com­pet­i­tive­ness to fo­cus more on high-tech fields.

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