Why Chinese Manufacturing is Central to the Presidential Debate

Tonight is the second round of presidential debates between President Barack Obama and Republican challenger Mitt Romney. No doubt the town-hall style debate will center round familiar topics: the national deficit, jobs, outsourcing, and domestic growth.

We might even hear a bit more “China-bashing” from both sides, with Romney accusing the Obama administration of failing to stop China from manipulating currency and rigging imports and exports, and Obama accusing Romney of outsourcing jobs to China.

Last month, the Obama administration announced it would launch enforcement action at the World Trade Organization to stop China from illegally subsidizing exports and overtaxing U.S. imports in the auto and auto parts sectors, but Romney says not enough is being done to rein in the Chinese, who he’s labeled as “cheaters.”

China has become a convenient whipping boy during this election season. Wherever we look China is robbing us of jobs, growth, financial capital, ideas, you name it. But the reality is more complex.

While it’s true that manufacturing employment has contracted in the U.S., from 19.6m in 1979 to 12m today, American manufacturing output have actually increased. The U.S. outdid China in worldwide manufacturing output by almost 10 percent in 2010.

This tells us two things. The nature of manufacturing is changing, and more manufacturing output doesn’t necessarily correlate to more job creation.

Regardless, U.S companies are making a slow shift towards reshoring, largely because of a natural social and technological metamorphosis in both the U.S and China.

While China has long been a great place to make goods because of its abundant cheap labor force, this is gradually changing. With the rise of a Chinese middle-class, higher wage demand and a conscious effort on the part of the Chinese to move from an imitation economy to an innovation economy, the U.S.-China relationship is evolving.

U.S. manufacturers are finding that quality assurance, faster lead times, proximity to local markets, lower transportation costs, simplified supply chains and technological advancements like 3-D printing are all reasons to bring their business back to the U.S.

Many big-name manufacturers like Caterpillar, GE and Ford are reshoring. The Boston Consulting Group (BCG) recently identified seven sectors—transport goods, appliances and electrical equipment, furniture, plastic and rubber products, machinery, fabricated metal products, and computers and electronics—likely to move away from China and back to the U.S. by 2015.

BCG surveyed 100 U.S.-based manufacturing companies with sales over $1 billion, 37 percent of which said they were planning to reshore manufacturing operations back to the U.S., or were “actively considering it.”

Whatever the case, China is none too pleased with the rhetoric coming out of the presidential campaigns.

“Over the past several months, Republican candidate Mitt Romney has worked pretty hard to portray himself as a steadfast China-basher, trumpeting the ill-grounded theory that it is China’s currency policy that has made Americans jobless,” said Xinhua News Agency, the official press agency of the People’s Republic of China.

Sorry China, there’s more to come. Next week’s third and final presidential debate topics have just been announced. Top of the agenda: The Rise of China and Tomorrow’s World.

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One thought on “Why Chinese Manufacturing is Central to the Presidential Debate”

  1. “U.S. manufacturers are finding that quality assurance, faster lead times, proximity to local markets, lower transportation costs, simplified supply chains and technological advancements like 3-D printing are all reasons to bring their business back to the U.S.”

    As Obama pointed out in last night’s debate to one of the town hall questions, there are some jobs that America probably won’t win back simply because of the cost of labor. But there are other factors at play that influence the manufacturing industry and manufacturing supply chain that are being argued for in favor of reshoring.

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