What a ball pen tells us about China’s manufacturing weakness

What a ball pen tells us about China’s manufacturing weakness

Jan 26, 2016

By Ko Tin-yau, ejinsight Premier Li Keqiang recently made a shocking revelation about the industrial capabilities of China on national television: despite the fact that the country is widely known as the “world’s factory” and produces everything from iPhones, aircraft carriers, high-speed railways to spacecraft, until now there is not a single manufacturer in China that is able to produce the tiny rotating ball fitted to the tip of a ball pen that disperses ink as you write. Each of these tiny metal balls has to be imported by Chinese pen manufacturers from overseas suppliers. Many TV viewers in the mainland were deeply shocked and saddened by this revelation, as they had all been under the impression that China is already a world-class industrial power. The harsh fact is that, even though China produces 38 billion ball pens every year, it is still unable to manufacture the key component, the rotating ball point. How could a tiny component of an object so commonplace that goes for less than one US dollar prove to be an insuperable hurdle for the entire Chinese industrial complex? Qiu Zhiming, chief executive of Beifa Group Co. Ltd., China’s leading stationery manufacturer, said the reason it is so difficult to produce that component is that the ball — which is usually made of brass, steel or tungsten carbide and kept in place by a socket at the tip of the ball pen — is so tiny (usually not more than 0.1 millimeter in diameter) that it requires state-of-the-art machinery and cutting-edge computerized measurement equipment with pinpoint precision to produce, not to mention the ability to produce the high-quality steel material of which it is made. The margin for inaccuracy in the production process of this tiny ball point is basically zero, or else it won’t be able to be fitted into the socket perfectly and rotate freely in order to deliver ink. Unfortunately, all these key technologies remain the weakest links in China’s manufacturing industry even to this day. As a result, all the rotating metal balls fitted to made-in-China ball pens have to be imported from Germany, Switzerland or Japan. The root cause of China’s backwardness in some of the...

U.S. Manufacturing Leaders Say Government is Failing to…

U.S. Manufacturing Leaders Say Government is Failing to…

Jan 7, 2016

“U.S. Manufacturing Leaders Say Government is Failing to Deliver the Help They Need” By Jeff Moad, Manufacturing Leadership With several U.S. presidential candidates promising to reinvigorate the manufacturing sector and “bring home” manufacturing jobs, and with the White House attempting to keep pace with manufacturing revitalization initiatives emerging from major global competitors including China, Germany, and India, you might expect manufacturing leaders to feel that their industry, at last, is receiving from policy makers the attention and help it needs. But you would be wrong. According to a recently-completed survey by the Manufacturing Leadership Council, the vast majority of manufacturers—78%–believe that their federal government is ineffective in supporting and enabling their success, and most (60%) have little faith that that will change over the next 12 months, campaign promises notwithstanding. Only 25% said policy makers have become more aware of and responsive to the needs of manufacturers over the past 12 months. Manufacturers said governments in Germany and China, in particular, are far more effective than the U.S. federal government in developing and implementing policies that support their manufacturing sectors. Where are manufacturers most in need of help from policy makers? Overwhelmingly, respondents to the Manufacturing Advocacy Survey said they need help attracting and developing the next-generation manufacturing workforce. Manufacturers also targeted regulatory reform, tax reform, and trade reform. Of much less concern are issues such as healthcare reform, and policy concerning currency, immigration, and energy. At the same time, 62% of manufacturers said they would welcome increased government support of university research aimed at helping the industry. And most (60%) said the industry would benefit from a  cabinet-level federal government agency devoted to the support and development of manufacturing. Manufacturers responding to the survey were split on President Obama’s proposed Trans-Pacific Partnership free trade agreement, with 38% expecting a positive impact from it, and 37% expecting a negative impact. While manufacturers are highly critical of government’s performance in supporting industrial companies and markets, they don’t let themselves off the hook. In particular, manufacturers said they can and should do more to improve the public image of manufacturing. Thirty-four percent of manufacturers described the public’s view of manufacturing as negative or very negative, and they say that...

The ‘Made in China’ story is falling apart

The ‘Made in China’ story is falling apart

Dec 7, 2015

By Myles Udland, Business Insider Here’s something you hear thrown around a lot: “China is taking all of our jobs.” This was perhaps true a generation ago.  But the reality is that while China’s economy took off in the last 20 years and seemingly everything was “Made in China,” the cost of labor was forever going up. And now, China is facing an economic slowdown amid a government-sponsored shift towards the service sector and away from manufacturing, the “Made in China” story is falling apart as Mexico and Brazil become more attractive for global manufacturers. One look at this chart tells you why: labor costs about five times more in China than it did two decades ago and now costs even more than it does in Mexico. In its year-ahead outlook, Credit Suisse includes this chart as part of its argument for being bullish on Mexico, nothing that Mexico’s manufacturing competitiveness — particularly against China — is as strong as its ever been. Mexico also benefits from having 81% of its exports flow to the US — an economy that is widely seen as the best Western economy — while Brazil, which has also seen manufacturing competitiveness measured by average US dollar wages in the sector increase against China, exports 17% of its goods to China, one of this highest proportions among emerging markets. Now, it’s worth noting that in the last year Mexico has taken an edge on labor costs against China because of the dollar’s strength, which benefits free-floating currencies like the peso over pegged currencies like the yuan, but this is a blip in the grand scheme of this shift over the last two decades. (Brazil, on the other hand, has all sorts of economic problems — not the least of which is a collapse in value of the real against the dollar — and so their “gains” in competitiveness here have come with major costs. Though when measuring any US-related manufacturing impacts here, Mexico and China are more relevant comparisons regardless.) The real story here, though, is that the manufacturing story has simply changed in China and around the world. For years the story in global manufacturing was all about China: labor was cheapest and consumption was highest. And that is...

TRUMP: One of my ‘real dreams’ is to convince Apple to move…

TRUMP: One of my ‘real dreams’ is to convince Apple to move…

Dec 4, 2015

“TRUMP: One of my ‘real dreams’ is to convince Apple to move its jobs to the US” By Colin Campbell, Business Insider Real-estate mogul Donald Trump said Thursday night that one of his “real dreams” for the US is for Apple and companies like it to shift their manufacturing operations to the US. The Republican presidential front-runner made the comments during a wide-ranging interview while promoting his campaign book, “Crippled America,” at his Trump Tower headquarters. One of the questions was how Trump would convince big companies like Apple to move production jobs away from other countries and to the US. “I love that question because we think of Apple as an American company,” Trump replied. “But they make their product in China. And they have offices here but China makes more money with Apple than we do, if you think about it.” Trump added: “And we have to bring Apple — and other companies like Apple — back to the United States. We have to do it. And that’s one of my real dreams for the country, to get … them back. We have a great capacity in this country.” The billionaire businessman pivoted to criticize China and Japan for manipulating their currencies, one of his favorite topics on the campaign trial. “If you think about it, they have an advantage in a lot of ways. First of all, they manipulate the hell out of their currency, which just kills us. It makes it so hard to compete. I will get them to stop,” Trump said. “But we have advantages because the shipping costs and the costs of what they do over there is so enormous.”...

Dollar’s Rise Erodes U.S. Manufacturing Competitiveness

Dollar’s Rise Erodes U.S. Manufacturing Competitiveness

Sep 29, 2015

By Jeff Moad, Manufacturing Leadership The dollar’s rise compared to other currencies over the past year has made U.S.-based manufacturing less cost-competitive, particularly compared to some top European exporting nations, a new study from the Boston Consulting Group finds. But U.S. manufacturing competitiveness fell relatively little compared with major exporting countries such as China, India, South Korea, and Mexico, largely because currency value fluctuations have, up to now, been less pronounced in those countries, the study finds. An update of earlier studies on the cost competitiveness of U.S. manufacturing, the BCG study was release last month, before China’s government launched a devaluation of that country’s currency. The study ranks countries’ manufacturing cost-competitiveness using an index based on four primary drivers: wages, productivity growth, energy costs, and currency exchange rates. While wages in previously-inexpensive countries such as China have continued to climb, currency fluctuation has had the biggest impact on the manufacturing cost competitiveness of leading exporters, the study found. Thanks largely to the growing value of the dollar, countries including Germany, The Netherlands, Italy, France, Russia, and Canada saw their manufacturing cost competitiveness relative to the U.S. climb by between six and twelve percentage points over the past year. Meanwhile, other major exporters remained relatively even with the U.S. in terms of manufacturing cost competitiveness. Mexico, and the U.K. saw their manufacturing cost-competiveness improve 2% compared to the U.S., while China and India saw theirs worsen by 1%. While the BCG index ranks the U.S. at 100 in overall manufacturing cost-competitiveness, it ranks China at 97, Germany at 115, the U.K. at 107, Mexico at 90, and India at 86. The BCG study found that the growth of productivity-adjusted manufacturing wages in China has slowed to 3% in 2015 after soaring by 156% between 2004 and 2014. Productivity-adjusted manufacturing wages in the U.S., meanwhile, are up 2% in the U.S. in 2015 compared to a rise of 26% between 2004 and 2014. Meanwhile, a second study indicates that the U.S. is becoming a more attractive location for manufacturers to nearshore production, perhaps because of improving cost competitiveness. A survey of 248 manufacturing and distribution executives in the U.S. and Western Europe by consulting form AlixPartners found that 40%...