China Trying to Move up Manufacturing Value Chain


Earlier today I wrote about the American manufacturing industry's efforts to introduce more automated technologies, a move hampered by a lack of personnel with the skills required to operate such systems. Switching to processes that emphasize such technologies rather than manual tasks could help the U.S. offset the labor arbitrage advantage enjoyed by China and other low-cost countries, say some experts.


China itself is making a serious push to shift its manufacturing business from low-skill, high-volume production of inexpensive goods to more sophisticated products like computers and automobiles, reports the New York Times. The government is introducing new labor and environmental regulations and halting tax breaks for factories in southern China, long the center of activity for low-cost manufacturers, while at the same time creating policies that favor companies promising higher-paying jobs for skilled workers.


During a meeting at the Chinese Academy of Sciences last summer, President Hu Jintao said:

We are ready for a fight to control the scientific high ground and earn a seat on the world's high technology board. We will make some serious efforts to strengthen our nation's competence.

Earlier this year, a government-backed corporation introduced its first commercial passenger jet. Another Chinese company has aspirations to produce a hybrid car within the year. Haase, a company founded just six years ago, sells 100,000 laptops a month and could become the world's biggest computer maker in less than a decade, say its executives.


China hopes that higher-end jobs will replace the business that is already moving to countries like Vietnam in pursuit of lower-cost labor. Earlier this year, Credit Suisse predicted that a third of China's export-oriented manufacturers could cease operations within three years. China is modeling itself on Japan and South Korea, countries that made successful transitions from low-cost manufacturing to high-tech products, related services and the establishment of dominant global brands like Sony.