BIZCHINA> Review & Analysis
Manufacturing might
(China Daily)
Updated: 2008-08-12 14:31

Forecasts that China is set to overtake the United States as the world's largest manufacturer next year will surely be eye-catching, if not as much as the Olympic Games in Beijing.

A top slot in global manufacturing may speak volumes for the remarkable rise of China's manufacturing-led economy over the past three decades.

But it tells little about the challenges the Chinese economy faces now, not to mention its reliability as a guide to how the country's manufacturing capability will develop in the long run.

According to a recent report by Financial Times, next year China will account for 17 percent of global manufacturing value-added output of $11,783 billion and the United States will make up for 16 percent. Last year the latter was still easily in the top slot and accounted for a fifth of the total while the former was second with 13.2 percent.

Given that China accounted for a meager 3 percent of global manufacturing just two decades ago, the recent surge of China as the world's workshop appears quite impressive. Considering the historical dominance of China in industry before modern industrialization began in the early 19th century, the ongoing great leap seemingly lends credence to the forecast of a jump of China's share of value-added global manufacturing from 15 percent in 2008 to more than one-third of the total in 2025.

As the world's fourth largest economy and third largest trade power, China is indeed positioned to further increase its manufacturing prowess.

The country's reliance on labor-intensive manufacturing to provide jobs for the world's largest population, the majority of which are still farmers, makes it necessary to continue to stimulate industrial investment growth. If the country's industrialization level catches up with the world average, China will account for about one-fifth of global manufacturing given the size of its population.

However, China's expected largest share of global manufacturing does not guarantee superiority for Chinese manufacturers in the face of global competition.

In fact, the country's efforts to cut energy intensity and pollutant emission have persuaded policymakers to focus more on expanding the service sector as a share of the GDP. Meanwhile, rising input costs and weakening external demand are exerting ever more pressure on Chinese manufacturers' profit margins.

It is fairly predictable that more and more Chinese manufacturers will struggle hard to move up along the industrial value chain for survival. And as a whole, they will even account for a larger share of global manufacturing in coming years.

Yet, taking into consideration the Chinese government's determination to pursue sustainable growth, it is far too early to lock China's growth in a track featuring manufacturing expansion at any cost.

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