China, the Manufacturing Capital of the World... to-be (Part 3)

(Continued from Part 2)

For 33 years since 1979, China had grown at an average of 9.9% a year. It is estimated that China's GDP expanded by 7.8% in 2012. China is also the largest exporter of goods to the USA, totaling $399.3 billion in 2011. Its exports in 2012 totaled $2.021 trillion and a labour force of 795.4 million. When talking about China, it seems that everything is in big proportions.

With all the impressive statistics, the title of this series of blog posts may be questionable, if not unsuitable. Coupled with the hype surrounding China's ability to become a manufacturing powerhouse in such a short time, it is easy to overlook other statistics.

It is important to remember that manufacturing in the USA is not, well, dead. With the advent of whole manufacturing communities becoming 'rust belts' since the 1980's, it is easy to assume that USA has grown out of the industry. But removing manufacturing from USA is near impossible. Some are talking about a revival in manufacturing. The cities leading in this revival include Seattle, Salt Lake City and Austin in Texas. Manufacturing in USA is still very much alive. Only, now the focus is directed more towards R&D and producing high value added products.

Last year, the real GDP growth of USA was only an estimated 2.2%. Compare that with China's growth, it is unenviable. However, economic growth rate is just one part of the comparison. There are other measures which would make the reason why China is not yet the largest economy and the manufacturing capital on earth.

Most noteworthy is the difference in Purchasing Power Parity (PPP) between China and USA. The definition of PPP provided by Investopedia, is the estimated amount of adjustment needed on the exchange of countries so that the exchange is equivalent to each county's purchasing power. Last year, China's PPP was $12.28 trillion while USA's was $15.66 trillion. Additionally, China's GDP in official exchange rate was $8.25 trillion while USA's was $15.65 trillion. Considering China's exchange rate is said to be very much depressed, $8.25 trillion is a lot! Hence, although China's manufacturing sector is expanding at an incredible rate, it still has not overtaken USA's.

(To be concluded in Part 4)

Cheers
zhusun

Further reading:
https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html
https://www.cia.gov/library/publications/the-world-factbook/geos/us.html
http://www.investopedia.com/terms/p/ppp.asp
http://www.ustr.gov/countries-regions/china
http://www.forbes.com/sites/joelkotkin/2012/05/24/seattle-is-leading-an-american-manufacturing-revival/