Engler and the NAM: China Not Overtaking U.S. Manufacturing

By August 17, 2008Trade

A Financial Times story about a study that predicted China overtaking the United States as the world’s top manufacturers drew a fair amount of attention last week. Unfortunately, it misstated the views of NAM’s President  and CEO John Engler, who writes a corrective column that appears in the Monday edition.

From “American industry can stay ahead of China“:

According to a report last week in the Financial Times, China is now reverting to form as the world’s workshop and will overtake the US as the world’s largest manufacturer next year. I and members of the National Association of Manufacturers strongly disagree with this prediction.

China has a long way to go to catch up with the US. The NAM’s analysis shows that in terms of real manufacturing value-added (price-adjusted, to reflect the quantity of output) the US remains by far the world’s largest manufacturer, producing nearly one-fourth of the world’s industrial output. Based on the highly respected World Bank database, our analysis also shows that we will produce twice as much this year as the fourth placed economy, China (the European Union and Japan are in second and third position, respectively). Even in current measures of manufacturing denominated in dollars (which inflate China’s position because of the rising yuan and other factors), China will produce only about 60 per cent as much as the US in 2008.

Far from overtaking the US next year, if China were to be able to continue its rapid 10 per cent-plus real annual rate of manufacturing growth, it would not equal US manufacturing production until nearly 2020. Moreover, given the constraints China is beginning to face, its ability to maintain that torrid growth is highly questionable.

Let me be clear. The only way China could surpass US manufacturing next year would be for the US to encounter an economic catastrophe of some kind. That would not be wholesome for us or anyone. It is possible – but not certain – that China may, in some future decade, become the world’s largest manufacturer. If this occurred because the Chinese economy moved away from export-led growth and began to see the type of domestic-led growth that Hank Paulson, the US Treasury secretary, has been trying to get them to adopt, this could elevate China’s living standard and create more demand for all goods and services in China – including imports from the US and the rest of the world. That would be a positive contribution to the global economy.

Here is the correction:

Correction: US National Association of Manufacturers
Published: August 18 2008 03:00 | Last updated: August 18 2008 03:00* Comments from the US National Association of Manufacturers included in an article on August 11 about forecasts for Chinese manufacturing made by Global Insight were wrongly attributed to John Engler, NAM president.

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