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Growth in Chinese Manufacturing

Growth in Chinese Manufacturing

Recently, conflicting reports on the expected growth of Chinese manufacturing have emerged.  Some have said that growth is strong while critics suggest a stall in the manufacturing industry has occurred.  So, what’s the true story?  Can we expect continued growth, or is the Chinese manufacturing industry destined to fall?


China:  A Fading Force or a Growing Player


There have been reports that manufacturing growth in China was much lower than the initial estimate by industry experts at the beginning of the year.  Other data, gathered in the same month and within the same time frame, seems to point to China’s manufacturing sector as strong and showing gains.  An index by HSBC showed a gain of 51.2 percent, which was an increase from the previous months 50.1%, in the manufacturing field.


So, which is correct?
It seems to be both:  Data has shown that smaller businesses are having trouble keeping up with increasing manufacturing and labor costs and the industries lack of resources.  It seems that larger companies continue to make great gains in manufacturing while smaller businesses are struggling and continue to post losses.  Most recently, stocks received a boost when it was reported that initial estimates of manufacturing returns were much lower than industry experts had expected.  While smaller business continue to struggle, strong factory orders where reported, signaling positive activity for larger businesses, in China’s manufacturing and industrial fields.


China’s Bright Manufacturing Future


One bright spot in the future of manufacturing in China comes from the China Construction Railway Corp (CRCC).  Recently, a lucrative $12 billion dollar deal to design and build nearly 900 miles of railroad in Africa was inked and signed.  It’s the single largest overseas engineering contract every to be awarded to a Chinese manufacturing company.  However, it’s not the only manufacturing contracted to be awarded to CRCC recently.  Another deal made was between Boston’s transit authority and CRCC consisting of an order of almost 300 subway cars for an estimated $567 million contract.  It seems that China’s manufacturing future consists on outsourcing some of its business.


A major shift in the manufacturing future of China is its newly developed relationship with Russia.  First, the two largest business transactions in history were forged between the two nations – each consisting of energy deals – and one that has made China Russia’s largest and most calculated natural gas customer.  These deals, plus thirty-eight others, have netted both Russia and China tens of billions of dollars.  Rising wages and increasing labor costs have dampened Chinese exports in recent years.  However, these costs have not been associated with a decrease in outsourcing manufacturing.  In an effort to maintain this upward swing in manufacturing, China will need to make strides to boost productivity, refine product development, and tame supply chain complexities.