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China Ousts US as World's Top Manufacturer

Forrest Jones

China accounts for 19.8 percent of the world's manufacturing output, compared with the U.S. at 19.4 percent.

The U.S should be concerned, experts tell the Financial Times.

"This shows the need for the U.S. to compete in the future not on the basis of commodity manufacturing but on innovation and new kinds of services that are driven by production industries," says Deborah Wince-Smith, chief executive of the Council on Competitiveness, a Washington-based business group.

"This marks a fundamental shift in the global division of labor (involving goods production) which is unlikely to be reversed in the near future," says Nicholas Crafts of Warwick University, an expert on long-term economic change.

The U.S. shouldn't worry too much, says Mark Killion, IHS’s head of world industry services.

It's more productive, staying neck and neck with China with far fewer workers.

"The U.S. has a huge productivity advantage in that it produced only slightly less than China’s manufacturing output in 2010 but with 11.5 million workers compared to the 100 million employed in the same sector in China," Killion says.

Furthermore, a lot of those workers in China are producing goods for Chinese subsidiaries of U.S. companies.

And manufacturing in the U.S. is helping to drive recovery here.

"Manufacturing has been a driver of the recovery thus far and this will remain the case," Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York, tells Bloomberg.

"Demand is starting to return and inventories are light relative to that, so restocking will provide a boost. For the Fed, it’ll be fairly status quo on policy, except for some comment about firmer energy and commodity prices."

www.moneynews.com/StreetTalk/China-Ousts-US-World/2011/03/14/id/389350

March 14, 2011

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