Photo Credit: Bloomberg Business Week
CHINA has been feeling its oats: They’re a bit impressed with their stature, and they have been flexing their trade muscles as a result of it, for many years. (Not to mention, they are also flexing their political and military muscles — most recently in Syria — and [reportedly] with cyber attacks against American government and business networks.) And, in their mind, why wouldn’t they? They’re obviously on the rise; what with one billion-plus people, a growing middle-class, a workforce that has consistently been favored by American big-biz over stateside labor, because of China’s much lower wage requirements, an expansive economic boom, their leading status in global exports and the fact that China already owns many American companies. What’s America’s recourse in addressing this, as it’s very much a threat to the country’s economic security? There hasn’t been much, so far. Diplomacy is required, because of that last and greatest factor: that the United States is somewhat economically indebted to the nation and China is an important American trade partner.
The Atlantic via Bloomberg Business Week reports on a new sector for China in their growing portfolio of power and influence across global markets: heavy industry. There has been a shift from the light exports and techonological consumer goods that have been examined of late for the workers’ rights issues, most recently in regards to Apple and Foxconn, and other small goods that have led to Wal-Mart becoming responsible for much of the American trade deficit, among other things — such as perhaps a business environment that has facilitated this — towards heavy industry. According to the Bloomberg data (top) China has been steadily increasing their heavy goods sector for the last three years, producing and exporting much higher numbers of construction equipment, trains, ships and cars; showing an especially strong increase; in fact, showing its greatest positive slope since about 2009.
Sany Group, a construction equipment company profiled in the Bloomberg article — and who are part of a corps of Chinese companies that rank in the top ten globally in the heavy industries sector — has an ambitious goal that is reachable; to lift their heavy industry exports to one-fifth of their total revenue over the next five years. Currently it represents only five percent of Sany’s $16 billion dollars in revenues. Sany and other companies will be assisted by $2.5 billion dollars provided by the government to modernize their facilities in order to meet this ramp-up. Rising labor costs which have increased by 15 percent annually since 2005 and the appreciation of currency, are making it tougher for China’s production model, originally based on cheap labor and smaller goods, and this has led many of the nation’s companies to shut down and move to Bangladesh, Cambodia and Vietnam. This move towards the “heavy” is their response, their Plan B, and it is in full execution.
The Chinese controlled 41 percent of the global ship market in 2011. And the amount of China’s heavy industry exports — of which two-thirds is machinery, according to Bloomberg — has grown from 29 percent in 2001, to 38.7 percent last year, according to the Beijing-based economics consultant, GK Dragonomics. Said Andrew Baston of GK Dragonomics, in Bloomberg Business Week‘s “China’s Export Machine Goes High-End” article:
‘They are making different products with higher technology, things they can charge more money for,’ says Andrew Batson, GK Dragonomics’ research director, who estimates that the new industries can help lift China’s share of global exports from 10 percent now to 15 percent by 2020. ‘The typical Chinese exporter is not a shoe factory in Guangdong anymore. Instead it is some kind of equipment or machinery maker.’
Read “China Takes Aim at the Profitable Heart of U.S. Manufacturing at The Atlantic [Here]
Read “China’s Export Machine Goes High-End” at Bloomberg Businessweek [Here]