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The cost competitiveness of US manufacturing is approaching China

January 03, 2015

After a survey of 25 major economies, Boston consulting group (BCG) found China's manufacturing competitiveness is still ranked No.1, but there are threatens of the leading status: the United States had climbed to No.2 and leading many other exporter countries. South Korea ranked the third.

The BCG assessment have four indicators: wages, productivity growth, energy costs and exchange rates. Transport costs are not counted. In the past few years, China's manufacturing industry because of rising wages, exchange rate and energy costs rise, the long competitive advantage is diminishing, while the United States for shale gas production increases, the price of natural gas decreased, electricity cost is decreased and constantly improve the competitiveness. In addition, higher productivity, lower wage rise pressure also accelerate U.S. competitive advantage.

BCG says the overall cost of the US is 10%~25% lower than the top 10 exporters excepted China, this is already similar to Eastern Europe. US manufacturing industry has been growing more competitive since 2004 than other big exporters such as Mexico, India and Netherlands. Manufacturing costs in China were 14% lower than the US and now only 5 % lower. In 2018, the cost of manufacturing in the US will be lower than that of China.

Anbound Information company analysis, in the past ten years, China's factory labor costs increased by 187% after adjusted, while the US only increased by 27%, and at the same time, the RMB against the US dollar exchange rate rises more than 30%. In our view, the US manufacturing industry less than China is only "cost competitiveness" and in terms of technology and Labor efficiency, their competitiveness is higher than China. "Cost competitiveness of manufacturing industry in China and the United States now is more and more close, this also means that Chinese manufacturing industry need to rebuild the competitiveness. China's" world factory "version 1.0 must upgrade to world factory " version 2.0" or " 3.0 " as soon as possible to maintain the relative competitive in world markets.