China Set To Take Global Manufacturing Lead

U.S. is forecast to lose the most ground in textiles, basic metals, computers, electrical equipment and household appliances.

BOSTON - China's manufacturing sector has been growing so quickly in recent years that the size of its output is set to exceed manufacturing output in the U.S. within the foreseeable future, according to a study by international consulting firm, Global Insight.
According to the study, when sales revenues (Gross Output) that are earned by the manufacturing sector are used to measure the size of output, China will grow to outrank the U.S. as early as 2008.
However, when the “Value Added” of the manufacturing sector is used to measure relative size, it will then take until 2013 for China to outrank the U.S.  Additionally, when output is measured using inflation adjusted dollars, the manufacturing Value Added in China will not surpass U.S. until after 2020.
Several important areas of economic growth, such as finance, IT and business services, in addition to manufacturing sub-industries such as aircraft, pharmaceuticals, heavy capital equipment and precision scientific equipment, are all expected to remain larger in the U.S. than in China.
Textiles, basic metals, computers, electrical equipment and household appliances are all sectors in which the U.S. is forecast to lose the most ground.
Concerns that China’s rapid growth in the manufacturing sector will be at the expense of other countries, particularly the U.S, should be eased for several reasons according to the collected data.
The fall in U.S.’s manufacturing world share is not a sign of weakening U.S. performance, but a result of the rapid growth of China overall.  In the past, while China saw manufacturing growth surge 10-15 percent compound annual growth rate (CAGR), the growth in the U.S. remained durable at three percent, with no evidence of stalling by the quick expansion in China. 
Looking ahead, the forecast for China’s CAGR could be trimmed from the current 15 percent to 8.0 percent by 2015 and the U.S.’s long term manufacturing growth will remain constant at 2.8 percent.
While foreign demand has supported China’s manufacturing growth recently, future growth in manufacturing will be increasingly diverted to meet the growing domestic demand instead.
Click here to review the entire report.
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