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%...

OBERHELMAN ON CNBC: A RENAISSANCE IN…

OBERHELMAN ON CNBC: A RENAISSANCE IN…

Sep 28, 2015

“OBERHELMAN ON CNBC: A RENAISSANCE IN MANUFACTURING” By Caterpillar Caterpillar Chairman and CEO Doug Oberhelman, along with Honeywell Chairman and CEO Dave Cote, was featured this morning on CNBC’s Squawk Box on its “voice of manufacturing” day. “We’re in the very beginning of a renaissance,” Doug said about manufacturing. Innovation is the Past and Future Caterpillar has a long history of innovation and using leading edge technology to provide customer solutions. “We are seeing a lot of things happening inside our factories that are really cool,” said Doug. “It’s exciting.” Through Cat® Connect and other leading products, Caterpillar machines are connected to each other, our factories, Caterpillar engineers and the equipment owners. “In the next twenty years, they will be more so,” Doug explained. “That generates more opportunity.” Caterpillar is constantly pushing forward, researching ways to move more dirt with less fuel, developing products that generate lower emissions and creating autonomous vehicle solutions. Doug repeated the message he’s telling employees every day: Innovation is key, now and in the future. Market Access Means Sales and Growth Caterpillar delivers its very best products and services, but that alone doesn’t ensure success. Laws and regulations around the world directly affect our operations and financial future. Doug underscored the need for pro-growth policies, including trade agreements. “We need access to markets. If foreign markets are opened even further and if the international playing field is level, we can expect even more opportunities for Caterpillar,” Doug said. “If we can … be on a level playing field, we win.” This level playing field also includes the U.S. Export-Import Bank. Caterpillar strongly supports the reauthorization of Ex-Im Bank that supports our customers and suppliers around the world. Failure to reauthorize Ex-Im Bank may likely cede business to Caterpillar’s overseas competitors. “We need the Ex-Im bank, bottom line.” Purchases of Caterpillar products are often contingent upon Ex-Im Bank financing because if customers can’t get financing from the U.S. Ex-Im Bank, they can get comparable financing from the export credit agencies of other countries and that benefits our competitors. We’ve Got to Win in China Doug addressed the importance of China to Caterpillar for many reasons, including that it is the largest construction equipment...

China Factory Indexes Ebb In New Sign Of Economic Weakness

China Factory Indexes Ebb In New Sign Of Economic Weakness

Sep 2, 2015

By Kelvin Chan, Manufacturing.net Chinese manufacturing showed further signs of weakness in August, adding to evidence of an inexorable slowdown in the world’s No. 2 economy despite recent government efforts to support growth. Two factory activity indexes released Tuesday were at multi-year lows. An official manufacturing index based on a survey of factory purchasing managers fell last month to 49.7, the lowest level since August 2012, from 50.0 in July. The index, compiled by the Chinese Federation for Logistics and Purchasing, is based on a 100-point scale on which numbers above 50 indicate expansion. A separate survey, the Caixin purchasing managers’ index, fell to a six-year low of 47.3 from 47.8 in July, although the number was slightly better than a preliminary reading released last month. Caixin’s survey focuses on smaller, private enterprises while the federation’s survey is weighted toward larger, state-owned companies in China’s manufacturing industry, which employs tens of millions. Taken together, the surveys provide a bleak picture of stubborn weakness in the overall economy. With the official index falling below the “critical” 50-point mark, “manufacturing has insufficient growth momentum,” National Bureau of Statistics economist Zhao Qinghe wrote in an analysis of the data. Some analysts said the weakness may not be as bad as headline numbers suggest because it stems from temporary factory shutdowns in Beijing and nearby Tianjin in August. Authorities have been trying to reduce air pollution ahead of a massive military parade in the capital on Thursday to mark the end of the 70th anniversary of Japan’s World War II surrender. China’s economic growth held steady at 7 percent in the latest quarter ending in June, which was the weakest performance since the 2008 global crisis. Officials hope to maintain the growth rate for the rest of the year but many economists doubt the target will be met. In the latest attempt to shore up flagging economic growth, China’s communist leaders cut interest rates last week, the fifth time they have done so in nine months. The rate cut had been expected after a slew of disappointing recent economic indicators, including a larger-than-expected 8.3 percent decline in July exports, weak retail sales growth and slowing industrial production and...