China Set to Take the Lead in Global Manufacturing

kiyuwwb

China is on pace to outrank the United States in manufacturing output. The actual timing of this change will depend on how output is measured. When measured as value added in current U.S. dollars, our forecast indicates this change occurring in 2013. When viewed in terms of sector gross revenue, China's ascension in manufacturing would appear to happen much earlier, and if adjusted for inflation and currency appreciation, the cross-over will not occur until after 2020. Will the rapid rise in China's manufacturing sector choke the U.S. economy? Closer scrutiny suggests that such anxiety is probably unfounded.

China's manufacturing sector has been growing so quickly in recent years that the size of its output is set to exceed output in the U.S. manufacturing sector in the foreseeable future. Nevertheless, the exact time frame for this change in ranking depends on how we measure the size of output.

Indeed, when sales revenues （gross output） that are earned by the manufacturing sector are used to measure the size of output, China will grow to outrank the United States as early as 2008. If, however, the value added of the manufacturing sector is used to measure relative size, China will not outrank the United States until 2013. Furthermore, when output is measured using real （inflation-adjusted） \"1997 U.S. dollars,\" then the manufacturing value added in China will not exceed that of the United States until after 2020.

An obvious follow-up question is whether the prospect of China's ascension in manufacturing is a cause for concern. Will the rapid rise in China's manufacturing sector stifle the U.S. economy? A closer analysis suggests that such anxiety is probably unfounded.

The expanding market in China is more likely to open up greater opportunities for the United States as well as other producers. Several important areas of economic growth are all expected to remain larger in the United States than in China, including finance, information technology, and business services, as well as manufacturing subindustries such as aircraft, pharmaceuticals, heavy capital equipment, and precision equipment for scientific and medical purposes.

The sectors where the United States is forecasted to lose the most ground in terms of share of world output are textiles, basic metals, computers, electrical equipment, and household appliances.

Choosing the Right Measure to Compare Manufacturing-Sector Output

One easily understood measure of manufacturing output is gross output （GO）, defined as the sum of all sales revenue across all production units within the manufacturing sector. Such summing up of sales revenue, however, results in substantial double counting in terms of output.

To illustrate, note that the purchase price of a car includes the cost of the parts the auto manufacturer buys from the parts manufacturer. The price of parts, in turn, includes the cost of iron and steel, and other inputs purchased by the parts manufacturer. Consequently, adding up the sales revenue of the car manufacturers with the sales revenue of parts manufacturers, plus the sales revenue of iron and steel manufacturers to make up manufacturing GO, results in obvious double counting of output, potentially multiple times.

Such business-to-business （B2B） interindustry transactions are taken out of the GDP calculation to avoid double counting of the true size of output. In addition, gross output includes the value of imported inputs, which is not a legitimate component of sector production. Therefore, total gross output （sales） is a flawed measure of the true size of sector output.

A better measure is industry value added（VA）, defined as sales revenue less the cost of all purchased inputs, thereby eliminating any such double counting of B2B transfers as well as the value of imported inputs. Consequently, the sum of VA across all sectors represents GDP.

The distinction is important because the U.S. manufacturing sector has a higher share of VA in total revenues （GO） than does China's manufacturing sector. The U.S. share of VA in GO is 36%, whereas in China, it is much lower at 25%. The lower share of VA in China partly reflects the large import components in its manufacturing industries. （Importing parts for assembling and re-exporting is a significant share of China’s manufacturing sectors.） Furthermore, the smaller share of VA in GO in China also results from the lower levels of labor productivity in Chinese manufacturing, lower wage rates and management costs, narrower profit margins, and more modest fixed cost components.

Global Insight forecasts inflation in China to be relatively more aggressive than in the United States. Further, the robust economic growth is also expected to support an appreciation of yuan relative to U.S. dollars in the coming years. Hence, manufacturing VA in China measured in nominal U.S. dollars shows a faster rate of growth than when measured in \"real\" U.S. dollars.

Implications of China's Manufacturing Growth for the U.S.Economy

The anxiety that the rapid growth of China's manufacturing sector will be at the expense of the manufacturing sectors of other countries, particularly the United States, should be mitigated for several reasons.

The fall in the world share of U.S. manufacturing is not a sign of weakening U.S. performance, but rather, a result of the rapid growth in China itself. Global manufacturing VA estimated at US$8.4 trillion in 2006 is forecasted to grow another US$7.1 by 2015, with China accounting for US$2.4 trillion of that growth.

In the past, while China saw manufacturing growth surging to a 10–15% compound annual growth rate （CAGR, which is based on VA in “real” terms） in its post-liberalization period, the growth in the United States remained resilient at above 3%, with no evidence of choking by the rapid expansion in China. In the future, our forecast shows China's CAGR being trimmed from the current 15% to 8% by 2015, and the United States' long-term manufacturing growth will remain mostly stable at around 2.8%.

Furthermore, manufacturing means more to the Chinese economy than it does to the U.S. economy. China's manufacturing sector accounts for 34% of its GDP, whereas in the United States, the share is 14% of GDP, with much greater reliance on services sectors, including the financial, wholesale, and retail sectors, and other business services.

Also note that globally, manufacturing accounts for only 18% of GDP （in nominal terms）, while the service sector is by far the dominant one at 67%. The U.S. share in global service sector output （currently at 33%） will remain far larger than China's share, which is currently at 3.4% and is expected to grow to only 6.5% of the world total by 2015.

While foreign demand has supported China's manufacturing growth in the recent past, future growth in manufacturing will be increasingly diverted to meet the growing domestic demand instead. Income growth and the consequent demand growth in this giant nation can be expected to enhance rather than hinder opportunities for external （U.S.） producers.

Within manufacturing, there are specific subsectors where the United States will maintain its superiority in the size of output, even beyond 2020. Aircraft manufacturing, heavy capital equipment, and precision equipment to be used for scientific, medical, and related purposes are all expected to remain larger in the United States than in China.

The United States is forecasted to lose the most ground in terms of output in such sectors as textiles and apparel, processed food and tobacco, basic metals manufacturing, computers, electrical equipment, and household appliances.




中国制造业规模将超过美国

　　近年来，中国制造业增长迅速。在可预见的时期之中，其总产值会超过美国。不过，中国赶超美国的确切年份取决于总产值的计量方法。

　　如果以制造业部门的销售额（即总产值）计算，那么中国最早在2008年就可以超越美国。然而，如果以制造业创造的增加值衡量其产出规模，那么中国要在2013年之后才能超过美国。通货膨胀和汇率因素对这个问题也有影响。如果按照扣除通胀影响的1997年美元价值计算，那么中国制造业赶超美国的时间要在2020年之后。

　　这就引出了另一个问题：中国制造业地位的提升是否令人担忧，中国制造业的迅速崛起是否会妨碍美国经济？更细致的分析表明，这样的担忧很可能是没有根据的。

　　无论对美国还是其他国家来说，中国市场的扩大都是机遇大于威胁。未来，美国一些重要行业的产值仍将大于中国，无论是飞机制造、制药、重型工业设备以及精密科研设备等制造业的细分产业，还是金融、信息技术和商业服务等行业，都是如此。

　　另一方面，美国在世界总产出之中的份额将会下降的产业，主要是纺织、基本金属、电子设备和家用电器等。

　　制造业产值比较的正确方法

　　要衡量制造业产出，一种很容易理解的概念是总产值，即制造业所有生产单位的销售额之和。然而，这种产值存在大量重复计算。举例来说，汽车的价格中包括零部件的成本，而零部件的价格又包括钢铁等投入品的成本。这样，在包括汽车制造商、零部件制造商和钢铁厂商收入之和的制造业总产值中就存在明显的重复计算。此外，总产值中也包括进口投入品的产值，而这并不是由本国制造业生产的。总之，总产值无法衡量制造业的真实产出。相比之下，更准确的产值计量概念是增加值，即销售收入减去所有采购的投入品成本。

　　总产值和增加值的区别之所以重要，原因在于美国制造业的增加值在其销售收入（即总产值）中所占的份额高于中国：美国的数值为36%，而中国则大大低于25%。中国增加值份额较低，有几方面原因。首先是用于组装、再出口的进口零部件在制造业产值中所占份额很大，因此其制造业的进口含量较高。此外，中国制造业的劳动生产率、工资和管理成本、利润率以及不变成本含量都比美国低。

　　《全球观察》预测，未来几年间中国的通胀水平将高于美国，加之中国经济强劲增长推动人民币逐步对美元升值，因此以名义美元价值衡量，中国制造业增加值的增速将高于以“实际”美元价值计算的增速。

　　中国制造业崛起不会损害美国经济

　　有人担心，中国制造业的迅速增长将损害其他国家、尤其是美国的制造业。这是没有必要的。

　　首先，美国制造业全球份额的下降并不表明美国地位的下降，而是表明了中国的高速增长。2006年，全球制造业增加值为8.4万亿美元，到2015年将增长7.1万亿美元，新增部分中将有2.4万亿美元来自中国。

　　虽然自市场开放以来，中国的制造业增速一直很高，保持着10%－15%的复合年均增长率，但美国的制造业增长也颇为强劲，增速保持在3%以上。可见，美国制造业并没有因中国的高增长而受到打击。展望未来，预计中国制造业的复合年均增长率将由当前的15%降至2015年的8%，而美国制造业的长期增长率也将大体稳定在2.8%的水平上。

　　再则，制造业对中国经济的重要性大于对美国经济的重要性。中国制造业在GDP占到34%，而美国的相应份额只有14%。相比中国，美国经济对服务业的依赖度要大得多。从全球层面看，制造业只占世界GDP的18%，而服务业的份额则高达67%。目前，美国服务业占全球产值的33%，中国的份额只有3.4%。到2015年，预计美国服务业的全球份额将为28.7%，仍将远高于中国的6.5%。

　　近年来，外需是支撑中国制造业增长的主要动力，然而，随着国内需求的增长，内需对中国制造业增长的贡献度将会增大。预计中国的收入增长及其带动的需求增长将扩大而不是阻碍美国企业面临的机遇。

　　即使是在制造业之中，美国一些细分产业的产值也将保持对中国的优势，2020年之后也是如此。飞机制造、重型工业设备以及精密科研设备等都属于这类产业。据预测，美国所有产业中，全球份额下降最快的将包括纺织品和服装、食品和烟草加工、基本金属制造、计算机、电子设备以及家用电器等。