Manufacturing: the strongest focus of Sino-US competition

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After Trump is elected president of the United States, the competitive situation between China and the United States will change significantly, even fundamentally.

After Trump is elected president of the United States, the competitive situation between China and the United States will change significantly, even fundamentally. Most people think that the focus of competition between China and the United States is trade protection, globalization, exchange rate, international investment and so on. However, I think the above aspects are not the strongest focus of competition between the two countries, and the manufacturing industry is the strongest focus of competition between the two countries.


Great power competition is a contest of economic strength


The fundamental basis and core logic of the strongest focus judgment is that the competition between major powers is essentially a contest of economic strength, which is the basis of competition in other aspects; and manufacturing is the main body and key element of economic strength. Trump is highly focused on rebuilding the U.S. manufacturing industry with the shrewdness of a businessman. On the one hand, it increases the threat from the U.S. manufacturing industry that our manufacturing industry faces. On the other hand, the change in the strength of the manufacturing industry will change the overall competition between the two countries. situation.


In order to solve the problem of hollowing out the domestic manufacturing industry and massive labor unemployment, Trump has implemented substantial tax cuts and deregulation on the U.S. economy, thereby promoting the return of manufacturing and revitalizing the U.S. manufacturing industry. Many scholars believe that Trump's approach is not feasible because of the high labor and production costs in the United States, and the return of the manufacturing industry will face higher costs than abroad. Some scholars take President Reagan as an example for analysis. Reagan's neoliberal economic policies vigorously promoted tax cuts and deregulation, but it was precisely from this period that American manufacturing began to flow out. For the analysis of Reagan's approach, we need to recognize two points: first, Reagan's neoliberal economic policies laid the foundation for the economic glory of the United States in the following decades, and second, the cost comparison of manufacturing between China and the United States is no longer what it used to be.


Since 1997, the average annual growth rate of real wages in China has increased by more than 10 per cent, while the average growth rate of real labor productivity is only about 2.5 per cent, and even in recent years there have been signs of stopping growth. However, real labor productivity growth in the U.S. manufacturing sector has been very significant, while labor wage growth has stagnated or even declined, which has significantly increased the ability and space for the U.S. to overcome production costs through productivity. In addition, my country's dependence on oil and gas imports has increased year by year, while the shale gas revolution broke out in the United States, making it the world's largest energy producer. The shale gas revolution has made the price of energy in the United States, which is dominated by shale gas, much lower than the price of traditional oil and gas in the international market, and the United States can greatly reduce energy costs. The different changes in production efficiency and production costs between China and the United States have seriously eroded the cost advantage of China's manufacturing industry relative to the United States in the past.


The U.S. manufacturing revitalization plan is very feasible.


According to Boston Consulting's calculation of the comprehensive cost of manufacturing in 25 export economies around the world, China's cost advantage over the United States is almost gone. The comprehensive cost of manufacturing industry calculated by the company includes four factors: hourly wage of workers, labor productivity, energy cost and exchange rate. The calculation results show that taking the comprehensive average cost index of manufacturing industry in the United States as the 100, the comprehensive average cost index of manufacturing industry in China has risen rapidly to 96 in 2014, which is only 4 points advantage compared with the United States. Moreover, our country's advantage is only reflected in labor costs. Considering that China's labor wages are rising rapidly, industrial land prices and property prices are also rising rapidly, and corporate tax burden, China's manufacturing cost advantage relative to the United States is likely to continue to weaken. In the current cost comparison between China and the United States, Trump's manufacturing return and revitalization plan has a strong feasibility.


Before Trump took office, the US government had already begun to promote the return of manufacturing, and Trump's administration will greatly accelerate this process. The financial crisis that broke out in 2008 severely hit the economies of developed countries, but it also forced the governments of developed countries to pay new attention to the development of their manufacturing industries. The Obama administration clearly put forward the "return of manufacturing to the United States" and achieved certain results. The US manufacturing industry has seen a significant return and recovery, and the rebound of the equipment manufacturing industry has even exceeded that of Germany. Moreover, the resurgent manufacturing industry in the United States is a high-end industry. High-end industries in the United States need to meet two criteria at the same time: first, the R & D expenditure of each industrial worker should exceed $450, or be in the top 20% of the industry; second, the number of people who have obtained STEM (science, technology, engineering and mathematics) degrees in the industrial team must be higher than the national average, or account for 21% of the industry. The industries that meet these two criteria are among the most innovative and best able to guarantee sustainable growth. The return, recovery and revitalization of high-end industries in the United States will inevitably bring serious threats and challenges to my country's manufacturing industry that is undergoing transformation and upgrading.


Both China and the United States are making every effort to develop and revitalize the manufacturing industry.


While revitalizing the manufacturing industry in the United States, China is also vigorously promoting and implementing the strategy of manufacturing power. The most direct strategy is the "Made in China 2025", which puts forward specific strategies, measures, methods, industries, steps, stages, goals, etc. for the development and revitalization of the manufacturing industry, and then my country proposes to implement supply-side structural reforms. A major reform measure closely related to the development and revitalization of the manufacturing industry. The degree of science, implementation and effectiveness of these strategies and policies in China will determine the degree of revitalization of China's manufacturing industry.


After Trump took office, the U.S. policy has been greatly strengthened, mainly as follows: first, reducing corporate income tax from 39% to less than 15%; accelerating depreciation of fixed assets; allowing companies to bring profits stranded overseas back to the U.S. A one-time tax rate of 10%; the second is to remove a large number of controls that increase the burden on enterprises; the third is to reduce the restrictions imposed by Obama and Clinton on energy infrastructure projects, to further develop the domestic energy industry, including shale gas, not only to ensure energy independence, but also to create energy cost advantages for the manufacturing industry; fourth, to adopt trade protection policies abroad, by abolishing free trade agreements that harm the interests of the United States, adopting more stringent trade sanctions and raising trade barriers, to promote the return of US manufacturing to the United States.


While the United States is making efforts, our country is also making efforts. At present, the "Made in China 2025" has entered a new stage of full implementation from the document compilation. Five major project implementation guidelines and three action or planning guidelines for service-oriented manufacturing, equipment manufacturing quality brand improvement, and pharmaceutical industry development will be released and implemented. Three planning guidelines for information industry, new materials, and manufacturing talents will be released soon. The "1 X" planning system has been completed. The "Made in China 2025" provincial and municipal guidelines were issued, and 5 cities and 3 urban agglomerations were approved to carry out pilot demonstrations of cities (clusters). A new pattern of manufacturing development based on local conditions, outstanding characteristics, regional linkage, and dislocation competition has initially taken shape. A number of major landmark projects have been implemented, a series of major breakthroughs have been made in the development of high-end equipment, and a series of "stuck neck" problems have been solved.


The above analysis shows that the strongest focus of competition between China and the United States is manufacturing, and both countries are taking unprecedented policy measures to develop and revitalize their manufacturing industries. It can be predicted that whoever can achieve success and gain advantages in the development of China's manufacturing industry will be able to take the initiative in the competition between China and the United States in bilateral relations and the international status of the two countries.

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