Healthcare Matters

Amidst one report after another indicating that China’s global grip on manufacturing is slipping, I stumbled into a story revealing how even India’s economy is taking major hits, based on its growing trade deficit with China. Far be it from me to suggest that all of the recent data supporting a US manufacturing rebound should be filed under “wishful thinking,” but I can’t help it. Simply put, I’m more inclined to think that the dust is just settling.

By 2015, the average hourly wage in the Yangtze River Delta, the heart of Chinese high-tech manufacturing, is expected to reach $6.31 –that’s up from $.52 an hour just a decade ago. That fact has been held out as spelling doom for China’s continued manufacturing dominance. Rising oil prices and a weak dollar are also impacting the gap. There are actually studies out there suggesting that if the US can stop the Chinese from manipulating its trade policies, the cost differential for producing goods in the US versus China may soon be as narrow as 15%.

Just 15%? That’s more than the operating margin of best-in-class US manufacturers.

While it’s indisputable that US manufacturing production is on the rise, increasing at an annual rate of 10.4% in the first quarter of 2012, pre-recession employment in our manufacturing sector is a pipe dream. Current US manufacturing job totals are roughly half what they were in just 1979! Add-in some labor saving technology and the evolution of US manufacturing toward higher tolerance, lower volume, yet more mission critical parts, and combine that with a country whose manufacturing trajectory is precisely the opposite and what do you get? You get something that looks a whole lot more like a deepening co-dependency, not a competition.

US manufacturing isn’t experiencing a rebound. It’s naturally selecting in ways, ironically, that will allow it to take fuller advantage of new market opportunities –like China.

—Tom Finn