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As China continues its meteoric rise in manufacturing and engineering, the country faces profound new challenges. In sight of this rising force, where does the U.S. stand?
Long-term data on the United States workforce show a trend toward increasing numbers of workers in science- and engineering-related occupations. Although different data sources yield somewhat different estimates of the size of this particular labor force, “there is no doubt that overall growth has been large and steady for more than a half century,” according to the National Science Board’s Science and Engineering Indicators 2008, released last week.
The U.S. government, however, reported that the U.S. lost 212,000 manufacturing jobs in 2007 alone, marking the first year that U.S. manufacturing employment has fallen below 14 million since 1950. Seasonally adjusted U.S. manufacturing employment now stands at 13.919 million.
Nonetheless, “America remains at the top of the value chain, producing high-quality, high-technology goods for domestic consumers and the rest of the world,” says Forbes. The U.S. still excels in high-technology goods such as biotech and aerospace equipment, because it has a large, highly educated workforce with the resources to invest in research and innovation, according to Dan Ikenson, associate director of the Cato Institute’s Center for Trade Policy Studies.
From Forbes:
As highlighted by [2007's] raft of ‘Made in China’ recalls — toothpaste, pet food and Mattel’s embarrassing $21 billion toy recall, China’s reputation is less than spotless. Furthermore, if there is a premium on creative design, China doesn’t have the edge. China has built an empire on being the world’s “bargain basement” factory, but for all its resources and manpower, the country has a dearth of globally recognized designer brands.
That is changing, though, as China has taken steps to shift its development base from resource and labor to technology and innovation. China is looking to gain more recognition for innovation and design through homegrown ingenuity.
The current generation of leaders in China is composed mostly of graduates from some of the country’s leading universities, typically trained in science and engineering. “Until this year’s 17th National Congress of the Communist Party of China,” New Scientist has pointed out, “every member of the central bastion of power … was an engineer by training.”
The country is pouring huge sums of money into science. Its spending on research and development has more than doubled in the past five years, and official plans call for a further rise.
According to another New Scientist special:
Already, top Chinese researchers and entrepreneurs trained abroad are returning to their homeland in unprecedented numbers. They are emphatic about one thing: wanting China to be able to stand with the U.S. and other leading nations as an equal partner.
Whereas the U.S. has more billionaires than any other country, China is No. 2 and closing fast thanks to “little-known entrepreneurs,” as The New York Times puts it. China will have 500 top innovative firms by the end of this year, “sharpening its competitive edge in the international market,” Vice Minister of Science and Technology Li Xueyong has said.
Yet, while China has advantages like large domestic and foreign markets, it needs to improve its quality of institutions and financial markets, according to the World Economic Forum’s Global Competitiveness Report 2007-2008 report. And although China’s share of the value in the world’s manufactured goods is growing, it currently makes up 8 percent of the pie, compared with the U.S.’s 21 percent, according to Ikenson.
“China’s innovation revolution also faces some serious hurdles,” Forbes notes. For one, although China’s Communist party has made strides in relaxing its regulations, some critics say its policies continue to intimidate businesses. Stronger intellectual-property protection laws are also needed.
In science and engineering professions, overall global growth from 1995-2005 has been uneven, with the number of researchers doubling in selected non-OECD economies including China, slower growth in the U.S. (35 percent) and the European Union (29 percent), stagnation in Japan (5 percent), and faster-than-average growth in the other Organization for Economic Co-operation and Development member countries (60 percent), the latest in the NSB’s Science Indicators series claims.
Meanwhile, India also remains a growing global threat to the U.S. and others’ economic leadership.
In his recently published book India’s Century: The Age of Entrepreneurship in the World’s Biggest Democracy — “the first from a government insider since the country began its economic reforms in 1991,” according to BusinessWeek — Kamal Nath predicts that in the 2020s, the country’s industrial (and agricultural) sector will surge just as its tech industry has.
Although India has improved market efficiency, business environment and innovation, it needs to address problems related to macroeconomic stability, infrastructure and access to health and education, the WEF’s report on global competitiveness notes. “If India is to maintain its transition towards economic modernity, the manufacturing industry — which has the greatest potential to absorb labor — must be its key strategic sector,” says Oxford Analytica.
Bolstered by all of this speedy economic development and industrialization, though, energy demand from Asia could be one of the main contributors to a worldwide competition for energy. Over the last two years, China and India accounted for about 70 percent of the increase in energy demand.
In unusually urgent tones, the International Energy Agency in November warned that demand for oil imports by China and India will increase by over 50 percent by 2030 and could create a supply “crunch” as soon as 2015 if oil producers do not step up production, energy efficiency fails to improve and demand from the two countries is not dampened.
Resources
Where America’s Beating China
by Evelyn M. Rusli
Forbes, Oct. 22, 2007
Science and Engineering Indicators 2008
National Science Board
USA: Manufacturing Employment Falls
Fibre2fashion, Jan. 5, 2008
China Special: Engineers Rule, OK?
by Richard P. Suttmeier
New Scientist, Nov. 7, 2007
China Special: Growing Pains of a Superpower
by Peter Aldhous and Gregory T. Huang
New Scientist, Nov. 7, 2007
The Global Competitiveness Report 2007-2008
by Xavier Sala-i-Martin, Michael E. Porter, Jennifer Blanke, Thierry Geiger and Irene Mia
World Economic Forum and Partner Institutes, 2007
Global Competitiveness Network: Frequently Asked Questions
World Economic Forum and Partner Institutes, 2007
Little-Known Entrepreneurs Putting China Near Top of Billionaires’ List
by David Barboza
The New York Times, Nov. 7, 2007
500 Top Innovative Firms to Add to Nation’s Competitive Edge
China Daily, Dec. 17, 2007
India’s Century: The Age of Entrepreneurship in the World’s Biggest Democracy
by Kamal Nath
McGraw-Hill, December 2007
What’s Good for India
by Steve Hamm
BusinessWeek, Dec. 13, 2007
India’s Economic Outlook Mixed
by Oxford Analytica
Forbes, Dec. 17, 2007
World Energy Outlook 2007 Edition
International Energy Agency, 2007
Warning on Impact of China and India Oil Demand
by Jad Mouwad and Julia Werdigier
The New York Times, Nov. 7, 2007
Approaches to Improve the Competitiveness of the U.S. Business Tax System for the 21st Century
Office of Tax Policy, U.S. Department of the Treasury, Dec. 20, 2007
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Trying to put a good spin on the deterioration of the USA is not a helpful strategy. As a nation, we have somehow come to the conclusion that we will survive and continue to lead the world by means of our “thinking.”
A nation’s greatness abd power comes from a combination of 1) natural resources that allow a nation to feed itself; 2) the ability to defend itself, and 3) the ability to manufacture products to increase the yeild so that the surplus may be sold or traded for the benefit of that nation.
Our nation now faces the reality that although we still possess great natural resources, and can defend ourselves against GROSS Military aggression, the most important key, the ABILITY TO MANUFACTURE has been systematically exported during the past 20 years…to the point that our nation no longer has the ability to sustain itself.
Our Commerce Department continues to report that the American worker is still the most productive human that has ever lived on the planet– but what a bunch of nonsense this is when so much of the actual MANUFACTURING is being done in China, India, and other countries at $0.20 per hour (if that)?
Take a good look around at the labels — at home, work, the hardware and department stores, to see where these products were actually made (MANUFACTURED), and ask yourself, “what would happen [to the USA] if these were not avaliable?”
As “simple” an item as a screw-driver might not even be produced in NORTH AMERICA in the next few years (if it is now)…any guess on how long it might take to begin producing screw-drivers in the USA given the current state of deterioration of our manufacturing community?
It is my hope that our nation will turn this trend around, but I think that we may not have the resolve or the time.
The USA is till the leading source of new technology and advanced products in the world. Yet the extreme trade imbalance between the US and China is of growing concern, mainly caused by China’s low manufacturing costs.
In the short term it is beneficial to both, but in the long term it is detrimental to both. China would not wish its US Treasury Bonds to lose appreciable value. Yet the US foreign debtload viewed as a per capita figure raises big questions about how it can be resolved. No president invoking offsetting taxes would survive.
The answer likely lies in taking a new look at mega survival technology, creating huge systems readily saleable to China and other markets such as India and Russia. These large projects likely can’t be supported except by Federal help and co ordination, much like the Apollo and Manhattan projects. If the technology is properly protected by agreements and correct product design, it can stay safe. There are numerous ways of extending this at commercial and technical levels; Japan exports equipment which can’t be accessed without destroying it. Globally needed survival products resulting from medical and photovoltaic nanotechnology, superconductors, photosynthesis of food protein, compact new energy storage (for automotive and domestic use) and geothermal energy sytems – these are examples of systems needed worldwide.
Another issue is the diplomacy in dealing with old countries proud of their heritage and culture. When products reach the point of sale they must be presented in a way which appeals to the local protocol. This must be respected, and this can be a topic of national trade education. I sell my products to China, and was recently told: “You don’t have to be polite to us anymore – we are your friends!”
Almost 20% of medium sized German companies sell to China. Think of this applying to the USA. It can be done, but it needs leadership and initiative at the highest levels, as a national priority. Short term R&D is not the route to go. The best exports are long term high benefit products and systems which will shortly be essential for global survival. It is surely time we took a real hard look at this strategy.
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