Not Made In China: AirplanesPlanning to take off? Chances are, the next plane you board will be a U.S.-made Boeing (nyse: BA - news - people )--manufactured in Washington, to be exact. Last year, the U.S. produced 4,522 complete civil aircraft, valued at an average of $7.84 million each, and 12,299 civil aircraft engines, with an average value of $597,935. To be fair, China does produce some parts, but the planes dominating U.S. skies are largely made in America. (Photo: AP/Boeing)
10.22.07
Evelyn M. Rusli
Forbes (USA)
As China continues its meteoric rise, life--and commerce--in America have become saturated with three words: "Made in China." The abundance of low-cost goods has made life less expensive, but as some critics argue, it has drained the country of factory jobs, as companies shutter plants and head east.
Indeed, the trade gap between China and the U.S. would be better described as a canyon. In 2006, China exported $287.8 billion worth of goods to the U.S. Meanwhile, the U.S. exported $57.2 billion to China, according to the U.S. Census Bureau.
But, the U.S-China trade deficit doesn't provide a complete profile on American productivity. While China excels at producing low-cost, labor-intensive goods, like sneakers, plastic toys, and clothes, America's factories actually churn out far more products, and they're worth a lot more money.
According to Dan Ikenson, associate director of the Cato Institute's Center for Trade Policy Studies, America manufactures 21% of the value in the world's manufactured goods—China's share is growing, but it only makes up 8% of the pie.
America remains at the top of the value chain, producing high-quality, high-technology goods for domestic consumers and the rest of the world. As highlighted by this year'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.
According to Dan Griswold, director of the Cato center, there are three main factors that favor U.S. production. Goods are usually made in the U.S. if they're heavy to transport, require high technology or are capital intensive as opposed to labor intensive.
Take the U.S. auto industry, for example. The market for autos is dominated by U.S., Japanese and Korean products, but many of these foreign companies, like Honda, Nissan, and Toyota own U.S. factories. Foreign companies use U.S. factories to stay close to the consumer and save on freight costs. China could do the same--but its technology reputation still lags behind its Asian counterparts. If the American public is wary of Chinese-made toys, imagine how a China-stamped auto would fare in its debut year.
America 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, Ikenson says. And, unlike China, America has strong property protection laws. "High technology requires proprietary processes, patents, copyrights, so patent holders want to keep their technology close to home," Ikenson said.
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.
This is perhaps best evidenced in the fashion industry. Most lines of premium demin, such as True Religion, which retails for $200 a pair and up, are manufactured in the U.S. If you move up the fashion ladder to couture houses like Chanel, you're still far away from China. The crème de la crème of the high end preserve their brand value by manufacturing their goods in traditional fashion centers such as Italy or France, and avoid the low-cost, low-quality stigma associated with Chinese production.
But China is on the move. As its wealth expands, and it becomes a middle-class society, it is looking to gain more recognition for innovation and design. Evidence of change has already surfaced. In July, China's biggest automaker, Chery, signed a 10-year deal with Chrysler to jointly launch the first Chinese-made cars in America and Europe. The first Chery cars are expected to hit American shores within two years.
Nevertheless, China still has a long way to go. "The anxiety of advanced technology coming out of China is misplaced. China's high technology is still only DVDs and laptops," Cato's Griswold says. "It will be quite some time before China carves out a role as a leader in the designer markets."
China's innovation revolution also faces some serious hurdles. First, there's the omnipresent government. Although China's Communist party has relaxed its regulations, some critics say its policies continue to intimidate businesses. "Under an authoritarian, one-party system, creativity and expression tend to be short-changed," Griswold says. The country will also have to beef up its intellectual property laws to encourage technological development.
Nevertheless, regardless of what China does, or how fast it moves up the value chain, it certainly won't last at the bottom of the value totem pole for long. Really low-end production is starting to move to new markets. Companies are starting to follow the "China plus one" trend, says Adam Segal, the Maurice R. Greenberg Senior Fellow for China Studies at the Council of Foreign Relations.
Given China's perceived instability and the steady rise in production costs, as China matures, "companies know you have to have production outside of China as well," says Segal. Today, the "plus one" trend often means Vietnam. Although Vietnam lacks China's manpower--population there is 85 million, versus China's 1.3 billion--it has many qualities of a "young" China.
Over the next several decades, other countries, such as Bangladesh, Cambodia, the Philippines and parts of Africa are expected to step up--they're already beginning to do so. "Not Made in China" may very well take on a life of its own.
Indeed, the trade gap between China and the U.S. would be better described as a canyon. In 2006, China exported $287.8 billion worth of goods to the U.S. Meanwhile, the U.S. exported $57.2 billion to China, according to the U.S. Census Bureau.
But, the U.S-China trade deficit doesn't provide a complete profile on American productivity. While China excels at producing low-cost, labor-intensive goods, like sneakers, plastic toys, and clothes, America's factories actually churn out far more products, and they're worth a lot more money.
According to Dan Ikenson, associate director of the Cato Institute's Center for Trade Policy Studies, America manufactures 21% of the value in the world's manufactured goods—China's share is growing, but it only makes up 8% of the pie.
America remains at the top of the value chain, producing high-quality, high-technology goods for domestic consumers and the rest of the world. As highlighted by this year'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.
According to Dan Griswold, director of the Cato center, there are three main factors that favor U.S. production. Goods are usually made in the U.S. if they're heavy to transport, require high technology or are capital intensive as opposed to labor intensive.
Take the U.S. auto industry, for example. The market for autos is dominated by U.S., Japanese and Korean products, but many of these foreign companies, like Honda, Nissan, and Toyota own U.S. factories. Foreign companies use U.S. factories to stay close to the consumer and save on freight costs. China could do the same--but its technology reputation still lags behind its Asian counterparts. If the American public is wary of Chinese-made toys, imagine how a China-stamped auto would fare in its debut year.
America 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, Ikenson says. And, unlike China, America has strong property protection laws. "High technology requires proprietary processes, patents, copyrights, so patent holders want to keep their technology close to home," Ikenson said.
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.
This is perhaps best evidenced in the fashion industry. Most lines of premium demin, such as True Religion, which retails for $200 a pair and up, are manufactured in the U.S. If you move up the fashion ladder to couture houses like Chanel, you're still far away from China. The crème de la crème of the high end preserve their brand value by manufacturing their goods in traditional fashion centers such as Italy or France, and avoid the low-cost, low-quality stigma associated with Chinese production.
But China is on the move. As its wealth expands, and it becomes a middle-class society, it is looking to gain more recognition for innovation and design. Evidence of change has already surfaced. In July, China's biggest automaker, Chery, signed a 10-year deal with Chrysler to jointly launch the first Chinese-made cars in America and Europe. The first Chery cars are expected to hit American shores within two years.
Nevertheless, China still has a long way to go. "The anxiety of advanced technology coming out of China is misplaced. China's high technology is still only DVDs and laptops," Cato's Griswold says. "It will be quite some time before China carves out a role as a leader in the designer markets."
China's innovation revolution also faces some serious hurdles. First, there's the omnipresent government. Although China's Communist party has relaxed its regulations, some critics say its policies continue to intimidate businesses. "Under an authoritarian, one-party system, creativity and expression tend to be short-changed," Griswold says. The country will also have to beef up its intellectual property laws to encourage technological development.
Nevertheless, regardless of what China does, or how fast it moves up the value chain, it certainly won't last at the bottom of the value totem pole for long. Really low-end production is starting to move to new markets. Companies are starting to follow the "China plus one" trend, says Adam Segal, the Maurice R. Greenberg Senior Fellow for China Studies at the Council of Foreign Relations.
Given China's perceived instability and the steady rise in production costs, as China matures, "companies know you have to have production outside of China as well," says Segal. Today, the "plus one" trend often means Vietnam. Although Vietnam lacks China's manpower--population there is 85 million, versus China's 1.3 billion--it has many qualities of a "young" China.
Over the next several decades, other countries, such as Bangladesh, Cambodia, the Philippines and parts of Africa are expected to step up--they're already beginning to do so. "Not Made in China" may very well take on a life of its own.
20 comments:
What did we tell you? Clamp down your citizen's right to be freed, you have clamped down your own existence or the more your citizen can do the better you and the more taxes they can pay. Aren't we right? Keeping your citizen to the lowest of the low and they cann't pay a dime of taxes to help you. Idiot!
don't think china will not be exporting aircrafts in the future. they are now making cars and will probably beat the u.s. cars in quality in a few years. they already have the technology to make missiles to shoot down american satellites.
in 5-10 years they will make better commercial airplanes and sell them for one-fifth the price of a boeing or airbus.
china was the world's oldest and most prosperous civilization. they invented gun powder, a technology which the white devils stole to create emperialism, slavery, colonialism, the world population boom that we have today.
in the end china will be only civilization left standing. if khmer people want to survive, i suggest we do our best to make friends with the chinese, not the white devils. the chinese have a 1000-year plan, while all the white devils care about is power, money and sexual gratification.
11:15AM I don't think so, sure china will move forward in cheap production of goods, but it will trail in innovation and high tech as always…..to tell you the truth I wouldn't fly in a Chinese built airplane. The point lies in the culture and education system.
11:33 that's what they said about japan and south korea. china is already making fighter jet and passenger airplanes. don't underestimate the chinese. in america chinese make up just 1% of the american population, but if you go to the top U.S. universities, they make up about 20-30%.
chinese don't export cheap goods to the u.s. anymore. they are exporting computers and high-end electronics and medical devices now.
again, don't estimate the chinese. their race is very similar to the japanese and koreans. if you are going to keep thinking that way, you are stuck in the past. look at the trends.
some khmer people look down at vietnamese people and think they're somehow inferior to us. that's why vietnam is way ahead of us, while we're stuck in stone ages. communist vietnam knows how to deal with the americans even though they don't like the white devils.
cambodians love the white devils but get nothing in return, just their child molesters and criminals.
11:15AM
You sound annoying from 75 to 79 did you remember that who lead and back Cambodia up,until we went through killing field? China,Youn what ever the 99 cent products made in China every where in the States I prefer to grab something from American made
it better and save me from frustrated,China walk behind USA 20 years you believe that? Imagine USA had a war they can stand up in ten years USA will go on their feet again,China has that kind of SYSTEMS? Do not kid to your self and the others.
12:05. americans were more responsible for 75-79 than the chinese. please study your history.
china may be 20 years behind the u.s. now, but they were about 40 years behind just 10 years ago. the chinese economy is growing much faster than the u.s.
why? the chinese are smarter than americans, and there are 1.4 billion of them, compared to only 300 million americans, who are getting dumber and dumber.
you're living in the past. you just need to look at the current trend to predict the future.
So you are a good fortune teller, that what you are telling us Viet?
12:22PM
I do not know what school you have studied but, I went through that Chinese control Cambodia,and Russia and youn so I have recognize all those China and youn are suck then I fled to stay here California while my family of two I have four brand new cars compare to chinese in Peking still using bicycle and eat potatoes climbed up the bamboo sky scraper on their construction sites I prefer to be living with dumb people in the States better living in the small land with billion people ,just one fault of each person
will cause the air are polluting,here we are poor people could find 70'' flat screen TV ,in one house
three to four computers,remotes control on the doors houses,and talking about food we tired because we not living for eating,we are afraid of fat ,so what you are bragging about your Chinese can you build your computer in China? I think the servers from us here,OH! MG people this day,if the US not ordering the 99 cents here may be they run out of their food Any thanks you tell your chinese people build the cars so chinese people can dump away their bicycles and walk by feet to work.
3:20PM correction (just one fart of each person)
To anybody that admired a killer government, you're growing dummer. Not those people that live in a society that their government allowed them to do whatever they can do to reach their potential!
Got news for you! You're next to be choped for soup, if don't look out for those killer Govern. Go and live in the land full of garbage, pollution and where people are starting to getting cough everywhere you go. Go catch some of those cough droplet and get TB. Happy catching!!! and no matter how rich the Chinese Govrn. gets, their citizen will always entile to no more than one flat or apartment or a car and that probably have to wait for another 50years, because there too many of them. By the time those poor soul citizen gets to recieve some of those regular and ordinary stuff, other people in other developing countries have move on far beyond that and than are alot happy than those fool forcing to do work by their Disqusting Gov. The true hurt ...isn't it? Go drink some of those water mixed with fecal of the local Chinese.
To sum it up, Communist favors less to none material. So that they can suffer more and struggle hard & more. The none Communist countries are the opposit. They favor more materials and more of everything and anything which would made their lives easier, happier and more comfortable. The Capitalists want their citizen to bring heaven to this Earth, if they can and why not? They are free to pursuit those dream and bring it to their reality. The more you can do for yourself the more taxes you can pay. American favor & love their rich citizens. Their millionaires or billionaires citizens are their darling.If other are poor, they are o.k with it. They weren't left out or without help. Those poor people got everything from their Goern. Fre apartment, free food, free electricity , free water and money. Not to say that they waste their taxes money, but it part of the Govr's. responsibilty to care for their poor and unfurtunate citizen. Sometimes you see one here and one there walking or wondering around in public places for a while that because they are ill, but they will be catched and brought back to the shelter. They don't slaughtered them just becuase they're crazy. Try that with the insensitive nasty rotten and mean Communist.Govn. They are the one that should be call The demonds or the devils and not others.
Hitler put all their none functional citizen in a gas chamber and the Communist is no different, just different method. The whole world know, except you! Vey very shameful of you to admire the demond that you think, they were God.
When the Chinese made tooth pastes killed in South America, all prestige hotels around the world pulled their plugs from using it. It was banded, took out and trashed it. The Chinese made stuff made everyone turned away. They do not want to associate or having anything to do with it. That will take sometimes, if not a long time to recover this embarrasing name. You can imagine the lost. Does the Chinese have insurrance to cover this? Probably not. That will take triple times, if not more times to get it back up and running. They have a long way to learn about the free trade and its disaster. Get ready for more! If you think American are growing dummer, think again.
Deosn't blue look magnificant?
To fool Viet Youn above , we khmer never look down to your mother and father!
We hate you aggressive and stilling habit! Your Viet stoll and kill our people and pimp your own children1
How can we associate with that kind of people!
Change yourself and be a good neighbor we will not look down on you1
Well, Viet learnt most of their skills from the US in south Vietnam during the Vietnamese war. So blame it on the US, will ya?
1:17
Sound retarded if Yiekcong has learned a bit from USA should be the better place to live,get straight please.
to 11:15 AM:
Before you said that China can beat the commercial airplans from Boeing or Airbus. Well, China must first produce the best engines for its self and its technologie. I can only confirm you the Boeing industry is 70 years old and dominates a perfect technologies and strategies. In 5-10 years, I see no way. May be 20 -25 years!
2:29, if you can get vietcong the US tax revenue, Vietnam will be the numero uno place to live. Get it?
4:20AM
No matter the Vietnam get the numero cientos or the paradise on earth I have my commitment to avoid the viet# 1 the thieves they might cut my pockets and steal my passport.
# 2 While I felt in sleep ,they my rob and kill me in the Hotel.
#3 I'm the tourist what should I waste my life in Viet?,because Vietnam war they kill a lot my people over there.
12:37, Vietnam did not go to your country to kill your people. Your people came to Vietnam and get themselves kill by splitting up Vietnamese country and their brothers and sisters. Therefore, you are culpable for your evil doing, get it?
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