The Financial Times noted yesterday that China is entering a new phase in its status as a manufacturing powerhouse.  In the minds of most of us, “Made in China” labels refer almost entirely to T-shirts and toys.  But Beijing has been transitioning beyond low-cost production and into the development of new, higher end consumer goods, including computers and electronic equipment.

China’s annual GDP growth has been running from 3-10% higher than the U.S. for the past 15 years.  In the same time, their share of the global manufacturing output has also risen, jumping from a miniscule 2% in 1990 to roughly 15% today.  By contrast, the U.S., Japan, and Germany have all steadily lost marketshare since 2000.

One could say that China has been hard at work in that time, running their productive engine at full steam.  The result?  Enough capital accrued to move into the higher-end research and development needed to put them at the vanguard of 21st Century manufacturing.  The Financial Times estimates that in 2007 alone, China was responsible for nearly 50% of worldwide “Computers and office equipment” production.

As the Financial Times sees it, “China is now going through a more subtle phase. It is becoming a giant test bed for manufacturing ideas, building on its existing strengths in low-cost production by using the efforts of engineers and developers not just in China but from around the world.”

The irony is that, with China now a first class manufacturing power, it remains an enigma, with widespread policy and development challenges.  But even more baffling is how the Chinese, who wish to be recognized as a great industrial nation, can continue to play the role of class cut-up when confronted with the set of trading rules by which they and other industrialized nations play the game.  It begins to seem more disingenuous when China continues its cumbersome policy of currency manipulation despite calls from the World Trade Organization (WTO) to cease and desist. 

There’s only so long that China can play the development card while simultaneously cornering the market on iPods and laptops.  The rules of trade exist for a reason.  At some point, someone’s going to send Beijing to the principal’s office.

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This entry was posted on Thursday, May 29th, 2008 at 6:03 pm and is filed under Holding China Accountable. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.