If the Olympics taught us anything, it is that China is changing fast. Of course, the Chinese love gold medals and are very good at winning them. And they can put together 2008 drummers who play in unison. But let's look beyond the Olympics at China's influence on world manufacturing.
For about a thousand years, China was the dominant world manufacturer. In 1750, China was responsible for an estimated 32.8% of the world's manufacturing; Britain, 21.3%; and America, Britain's unhappy colony, a meager 0.1%. Around 1850, Britain, with its industrial revolution, overtook China and kept the manufacturing gold medals until the early 20th century, when the United States became the largest goods manufacturer. The U.S. is now about to lose its gold medals. China is expected to surpass the U.S. in production of manufactured goods in 2009.
Yet, China has lost more manufacturing jobs in the last decade or so than the U.S. has. Between 1995 and 2002, the U.S. lost 2 million manufacturing jobs while China lost 15 million, according to the Conference Board.
U.S. News & World Report reports that China is downsizing the number of its manufacturing establishments at a rapid rate. In the past year, 10,000 factories have closed in the Guangdong Province. And the rate is accelerating, according to the report. These establishments are closing because the type of manufacturing they specialize in accumulates no profit as costs rise for sourced goods, logistics and transportation, and labor. The Chinese economic margins in many companies have gone from slim to none. Given that the Chinese government made clear recently that it no longer wishes to be the world's low-cost producer, these establishments get no favors from government.