By Cal Widdall
In 2010, China overtook Japan to become the world’s second largest economy and most experts believe it will only be two or three decades before it becomes number one, officially making the U.S. it’s bitch. As shown in a recent article by 24/7 Wall St, China has already surpassed the U.S. in a number of industries that America is traditionally considered to be the world leader – you can view them above.
Niall Ferguson – historian, Bloomberg contributing editor and someone who generally seems quite clever – recently called China the ‘engine’ of global economy and hypothesised that without China the recession would have been more like the Great Depression.
Worryingly, some predict that this engine will break down in the near future, citing factors such as the aging population, credit bubbles and the effects of this year’s critical leadership change.
However, the Financial Times reassuringly dismisses the theory with five reasons why China will remain the factory of the world:
1). Skills. Many of the middle and senior managers in China’s factories have been working in production their whole lives. There is, in southern China, an army of experienced, trained staff who have 20-30 years in industry. Few other places in the world can offer that level of expertise in any manufacturing field.
2). Scale. Wages in some Chinese factories have already reached levels comparable to eastern Europe – in EU member states like Romania and Bulgaria. But none of those countries has the sheer weight of numbers required to build factories employing hundreds, thousands, or even tens of thousands, that southern China can offer.
Plus – even in 2020, China will still have the more than 20 per cent of the global working age population, according to Li Cui of RBS.
3). Infrastructure. China’s ports, freight railways and airports – especially in the south – are as good as anywhere in the world.
4). Supply chains. After 30 years of manufacturing, most businesses have well established chain of supporting manufacturers. Although foreign businesses often have a role to play in these chains – as witnessed by the number of Japanese, German and Korean components in an Apple iPhone, for example – replicating those entire chains elsewhere in the world seems like an unlikely prospect.
5). Future customers. Southern China has traditionally relied on its ports to get goods from factories to shop floors across the world. Now the local government is busy building a new freight rail network to help ferry goods from Guangdong up into central and northern China. As the Chinese consumer spends more, Chinese factories will be much closer the their target audience.
So, you see, there’s absolutely nothing to worry about. Long live cheap goods to Wal-Mart!
List from Business Insider.