China has officially ousted Germany as factory of the world. Cue angst in Berlin, cheering in the streets of Tiananmen Square?
Not a bit of it. All the data really tells us is that the world isn’t flat and manufacturing is fluid: so long as ships ply the seas, goods can be made wherever labour and factory space is cheapest. And there is no getting round it: China is cheap and, wage inflation notwithstanding, managing to make its exports cheaper still.
According to data from the US, prices for European imports rose some 2 per cent last year while those from China fell by a similar amount. Business chiefs and politicians can, and do, grumble about the advantage of the cheap renminbi but that is largely bunkum. (And could become more so, if the Euro continues on its current trajectory.) Even a gaming console, never mind really serious bits of kit, contains parts made elsewhere and simply slotted together in China.
Besides, the smart foreigners don’t waste time grumbling – they’re on the red-eye to Shanghai. European giants like Siemens, Nokia and Ericsson are big in China, as both manufacturers and (crucially) vendors. Auto-makers who flocked to the country with half-formed notions of ultimately using it as an export base discovered something even better: more cars are sold there than in the US. GM reckons its own sales could soon be bigger in China than in the mother country. The world’s fastest train, a vanity project if ever there was one, is being built in China – by Siemens, Bombardier, and Alstom.
Nonetheless, some angst is understandable. Manufacturing generates two things politicians everywhere desperately need: jobs and tax receipts. Most of the latter will still accrue overseas, along with profits. Jobs are a tougher call, but there are two ways round that. Engaging in protectionist bluster may be the more tempting, but training mandarin-speaking engineers would be infinitely wiser.
