China tops list of global manufacturers

By Tan Yingzi China Daily
Updated: 2010-06-24 00:00
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WASHINGTON — China has topped the list of global manufacturing powerhouses, thanks to its rising eminence in the sector over the past 10 years, a new worldwide research report released Wednesday shows.

The 2010 Global Manufacturing Competitiveness Index also shows that over the next five years, China, India and the Republic of Korea will continue to hold the top three positions, while the manufacturing super powers of the late 20th century — the United States, Japan and Germany — are expected to become less competitive.

In five years, the US, now ranked fourth,  will be edged out to fifth by Brazil, with Mexico moving to sixth, ousting Japan to seventh. Russia will by then rocket from 20th to 14th.

Other Western European nations will be similarly challenged, especially the Czech Republic, the Netherlands, Switzerland, the United Kingdom, Ireland, Italy and Belgium, a finding made more dramatic by the continuing upheaval of the Euro.

And China’s currency reforms, announced last weekend, will not affect the country’s manufacturing competitiveness, due to the large and growing domestic demand for local products, industry insiders said.

“No matter what happens to the exchange rate, China will have a robust manufacturing sector,” Samuel Allen, chairman of the Council on Competitiveness and chairman and CEO of Deere & Company, told China Daily.

“It is good for global markets to let the currency fluctuate, and certainly it will benefit US manufacturers.”

James Quigley, CEO of Deloitte Touche Tohmatsu, said the currency reform will benefit every country, including China.

“The rebalancing of world economy will be facilitated by allowing the currency to fluctuate more,” he said.

“I don’t think it (rebalancing) will be at the expense of China, and it is going to be for China to have sustained expansion in all our economies.”

Most respondents from China think their government makes competitiveness easy, compared with respondents in Europe and the US, with 70 percent citing government support of science, technology and innovation as advantageous.

But immigration policies and healthcare will inhibit China’s competitiveness, the report says.

Complex and strict immigration policies limit the mobilization of the workforce in China and impede the move of overseas talents to China. Lack of access to healthcare and insurance is also a major contributor to poverty and will result in high savings rates and reduced consumption.

The report, from Deloitte’s Global Manufacturing Industry Group and the US Council on Competitiveness, is based on a survey of more than 400 chief executives officers and senior manufacturing executives worldwide, conducted in late last year and early this year. It also draws on interviews with key manufacturing decision-makers.

“At its broadest level, the study confirms that the global competitiveness landscape for manufacturing is undergoing a transformational shift that will reshape the drivers of economic growth, high-value job creation, national prosperity and national security,” said Deborah Wince-Smith, president and chief executive officer of the US Council on Competitiveness, a leadership organization committed to ensure the US remains the world leader.

In addition to the rankings, the report indicates that access to talented executives capable of supporting innovations, not labor, materials or energy, is the key factor driving global competitiveness at manufacturing companies.

For those executives, talent-driven innovation, cost of labor and materials, energy cost and policies are the top three competitive drivers in manufacturing.

“Almost two thirds of all the R&D in this country comes out of the manufacturing sector, so it has always been a source of good jobs and a source of innovation in America,” said US Commerce Secretary Gary Lock in a video speech for the release of the report.

“Business cannot be successful unless we have highly educated workforce.”