China losing manufacturing jobs

According to a new US study released last week, China is actually losing more manufacturing jobs than the United States!

According to a new US study released last week, China is losing more manufacturing jobs than the United States! For the entire economy between 1995 and 2002, China lost 15 million manufacturing jobs, compared with 2 million in the US.

“As its manufacturing productivity accelerates, China is losing jobs in manufacturing – many more than the United States is – and gaining them in services, a pattern that has been playing out in the developed world for many years,” concludes the study from The Conference Board.

According to Robert H. McGuckin, Director of Economic Research at The Conference Board and co-author of the study: “Increased unemployment has also accompanied the restructuring of the industrial sector, but per capita income has risen over the period.”

The new report from The Conference Board, the global research and business membership network, is the result of a joint research project with The National Bureau of Statistics of China. The study is based on data for the 51,000 large and medium sized firms in China’s manufacturing, mining and the utilities industries. While the study focuses on the larger firms, according to McGuckin, “the same patterns are observed among smaller firms.”

China is rapidly losing manufacturing jobs in the same industries where the US and other major countries have seen jobs disappear, such as textiles. Matthew Spiegelman, Economist at The Conference Board and co-author of the study, notes: “The US lost 202,000 textile jobs between 1995 and 2002, a tremendous decline by any measure. But China lost far more jobs in this sector – 1.8 million. All told, 26 of China’s 38 major industries registered job losses between 1995 and 2002.”

The study points out that while developed countries’ jobs are being offshored to China, exports are only one piece of China’s industrial expansion. Says The Conference Board study: “The rapidly growing domestic Chinese market, which has developed a voracious demand for goods and services from both local and imported sources, has fed China’s economic boom.”

China’s industrial labour productivity growth exploded at a 17% annual rate between 1995 and 2002. As in the more developed countries, this rise in productivity comes from improved technologies and the reallocation of resources from lower to higher value activities.

McGuckin states that “continued restructuring within the industrial sector as well as from shifts to services should lead to further productivity increases and improved incomes.”

The advances in productivity are broad-based across the industrial sector, with 36 of the 38 major industries experiencing increases between 1995 and 2002. In fact, 27 of the 38 saw annual average productivity growth of over 10% (compared to just 4% in U.S. manufacturing over the same period).

China’s industrial growth comes from both the downsizing and restructuring of government firms and the upsizing of foreign and foreign-invested firms as well as private domestic Chinese firms. Both the foreign and government firms increased labour productivity by similar magnitudes. The private domestic firms showed somewhat slower, but robust productivity growth of 9% and much faster employment growth.

Because foreign and foreign-invested firms are upsizing, they are responsible for an increasingly large share of China’s industrial output and productivity growth. These firms, which include both joint domestic-foreign partnerships (79%) and pure foreign enterprises (21%) accounted for 34% of the output in 2002.

While their share of industrial output plummeted from 64% in 1995 to just 30% in 2002, state-owned firms remain an important force in China’s industrial economy. Domestic private firms increased from 8% to 29% of output in 2002.