China Overtakes U.S., Ending 100-Year Run

by StockJockey

Thursday, August 14, 2008 - 2:16 am

While the medal count at the Olympics is neck and neck, it appears China will wrest control of the gold medal in one key category...as the largest producer of manufactured goods:

China is set to overtake the US next year as the world’s largest producer of manufactured goods, four years earlier than expected, as a result of the rapidly weakening US economy.

The great leap is revealed in forecasts for the Financial Times by Global Insight, a US economics consultancy. According to the estimates, next year China will account for 17 per cent of manufacturing value-added output of $11,783bn and the US will make 16 per cent....Last year the US was still easily in the top slot and accounted for a fifth of the total. China was second with 13.2 per cent.

John Engler, president of the National Association of Manufacturers, a Washington-based trade group, played down the effect of the projections. It was “inevitable” that China would take over on account of its size, he said. “This should be a wholesome development for the US, for it promises both political stability for the world’s largest country and continuing opportunities for the US to export to, and invest in, the world’s fastest-growing economy.” FT

Of course, John Engler was once governor of Michigan, and deserves part of the blame for letting the state slip into third world status. Homes might sell for a dollar in Detroit, but the moving trucks are still streaming out, and the state is symbolic of the shift.

China has made great strides since 1990, and now reclaims a title it held for 1,800 years, and relinquished to Britain in 1840.

Capitalism is keeping the Communists in power, but it would seem that the law of large, large numbers will bite them in the ass sooner or later. The government will be hard pressed to maintain its growth rate with the U.S. faltering, and sign of a slowdown, albeit from a rapid pace, are showing up in the numbers:

China’s industrial-output growth cooled in July to the slowest pace since February 2007 on weaker export orders and factory shutdowns to clear the air for the Olympic Games.

Production rose 14.7 percent in July from a year earlier, the statistics bureau said today, after gaining 16 percent in June. That was less than the 15.9 percent median estimate of 20 economists surveyed by Bloomberg News.

``This slowdown may indicate that export growth will be lower in coming months,’’ said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. ``Factory closures before the Olympic Games played a small part.’’

Weakness in economies around the world pared orders for goods, while higher fuel and raw-material prices deterred some companies from expanding. The slowdown, exacerbated by attempts to prevent pollution in Beijing during the Olympics, suggests an acceleration in China’s July export growth is unlikely to be sustained.

America is getting a tutorial on China thanks to the Olympics; no doubt Staycations in the August travel season are contributing to the TV ratings, and middle America is getting an eye-opener.

Once the Olympics end we will start the second inning of the China Century.

But maintaining the momentum might not be so easy. But the interdependency grows every day, and wishing for China to sneeze might not be such a good idea, given we might catch a cold.
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China, Post-Olympics

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Democracy in China? Not so fast.

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China to overtake US as largest manufacturer
FT

China Industrial-Output Growth Slows on Export Orders
Bloomberg
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