China: The other side of the coin
By Brad Perriello -- Industrial Distribution, 5/1/2008 10:07:00 AM
In this space and elsewhere, China’s rise to a position of dominance in the global manufacturing industry has garnered much attention. But there are aspects of that rise that don’t get as much notice, namely the burgeoning inflation being spurred by the country’s economic boom (and a corresponding increase in manufacturing costs) and the surprising surge in exports from the United States to China.As U.S. Industry Today reports, all 50 states have upped exports to China since 2000, especially Michigan, Ohio and Pennsylvania—which together sent more than $1 billion worth of exports there in 2007.
Citing a U.S.-China Business Council (USCBC) report, the Web site notes that China is now the third-largest importer of American goods and services, trailing Canada and Mexico. The United States sent $65.2 billion in exports to China last year, an 18 percent increase over the prior year and a fourfold increase since 2000.
“Most Americans are aware of China's manufacturing output, since they see it on store shelves every day,” USCBC President John Frisbie told the Web site. “Less known, however, is that the U.S. remains the world’s largest manufacturer—twice as big as China—and China is buying more and more of America's exports.
The USCBC report notes the triple-digit growth in exports to China posted in nearly every state since 2000. Exports to China grew 300 percent between 2000 and 2007, from $16 billion to $65 billion; exports to the rest of the world grew 50 percent during that time, according to the report.
As quickly as those changes have occurred on this side of the Pacific, it’s been an even steeper ascent for China, where the economy has grown more than 10 percent for nine straight quarters, according to Bloomberg.
That has sparked inflation, which hit its highest point in 11 years (8.7 percent) in February. It’s also meant a rapid increase in the number of Chinese citizens reaching middle class status, which in turn has prompted developments including mandated vacation time, maximum work hours and wage increases.
That means cost increases for Chinese goods and for products made there that U.S. manufacturers rely on, either for private labeling, OEM components or other purposes. This dynamic helps offset the trade imbalance between the two countries; as prices for Chinese goods rise (and concerns over their quality rise with them), more expensive equivalents made here become increasingly attractive for buyers in China and the United States.
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