From The Financial Times:
China is set to overtake the US next year as the world’s largest producer of manufactured goods, four years earlier than expected, as a result of the rapidly weakening US economy.
The great leap is revealed in forecasts for the Financial Times by Global Insight, a US economics consultancy. According to the estimates, next year China will account for 17 per cent of manufacturing value-added output of $11,783bn and the US will make 16 per cent.
Last year the US was still easily in the top slot and accounted for a fifth of the total. China was second with 13.2 per cent.
John Engler, president of the National Association of Manufacturers, a Washington-based trade group, played down the effect of the projections. It was “inevitable” that China would take over on account of its size, he said. “This should be a wholesome development for the US, for it promises both political stability for the world’s largest country and continuing opportunities for the US to export to, and invest in, the world’s fastest-growing economy.”
But wait a minute. Here’s a BusinessWeek story from last week, “As Olympics Open, China’s Economy Slows“:
On the eve of the Olympics, all eyes are on Beijing. Beyond the spectacular architecture (BusinessWeek.com, 7/30/08) and staging at the Olympic Green, another scene, decidedly less euphoric, is playing out in factories across the country. “As the day of the long-awaited opening ceremony arrives, China’s economy is indeed slowing,” writes Jing Ulrich, Hong Kong-based chairman of China Equities with JPMorgan (JPM), in an Aug. 7 research note. A slowdown in export growth is “rippling across the economy,” she adds. “New orders at factories have declined, and the country’s property market has seen a sharp drop in transaction volumes.”
In a worrisome sign that China’s growth streak is losing more steam, the latest official statistics on manufacturing show the output of Chinese factories may have actually contracted in July. The Purchasing Managers Index (PMI) fell to 48.4 in July, the first time it has dropped below the 50 boom-bust line since the government introduced the measure three years ago.
And the U.S. GDP grew by 1.9 percent during the second quarter of 2008, twice the rate of the first quarter. How exactly does growth meet with the Financial Times’ “rapidly weakening US economy?”
(Hat tip: Slate’s Big Money column.)
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