Is the “Made in China” Label Headed for World Domination or Extinction?

When the words “Made”, “in” and “China” are thrown together, they create a phrase with far more meaning than the sum of its parts. Whack a Made in China sticker on something and many people’s valuation of it will immediately go down.

Chinese manufacturers have, admittedly, made enough mistakes for “Made in China fail memes” to be a thing.

Yet many items with high-end price tags were also made in China. If you have an iphone, for example, your beloved little piece of tech was almost exclusively manufactured in China (although there are rumours it may soon be shifting to India).

Is there a trade war looming?

This is a complicated situation and requires a brief tour through the fallout from the Chinese civil war to put it in context. After the ousting of Mao Zedong in 1949, the Republic of China (ROC) retreated to Taiwan where it went on considering itself the ruling force of the whole of China. Meanwhile, the People’s Republic of China, seated in Beijing, continued to believe they held power.

So Taiwan isn’t a country in it’s own right. It’s more like China’s alter ego. But neither ego recognises the other’s right to rule. Mainland China does not dig the situation at all and wants Taiwan to stop resisting its subsummation.

This stalemate between the two Chinas makes it difficult for the rest of the world to strike trade agreements with the divided nation. The USA in particular was faced with a seemingly impossible situation as it had been a supporter of the ROC (now Taiwan) before the defeat of Mao Zedong.

With both governments insisting they were the real China, the US found itself in a diplomatic dilemma as surreal as it was crucial.

Introducing the one-China principle

The answer to this complex situation came in the form of a psychological trick that worked remarkably well considering how blatant it was. America’s one-China principle states that the US does not recognise any separation between China and Taiwan.

In a move reminiscent of the old *cough-sarcasm-cough* technique, the US sidestepped the question of which government it recognised as the ruler of this unified China. Each government is allowed to believe they are considered the true ruling power and both took the bait.

The simple policy has allowed trade to flourish between the countries for more than 50 years. The US has even been able to sell arms to Taiwan and assist with its defences against mainland China.

The problem now is, Taiwan has stopped caring so much about having any sovereign claim to the rest of China. It just wants to do its own thing and be recognised as a country in its own right. So one-China may not cut it with them for long.

Meanwhile, mainland China still wants Taiwan back under its control. So, if Taiwan pushes the issue, the one-China policy will lose its potency and the US, and other countries trading with the two nations, will be forced to reconsider their positions.

Tension between the US and China

Then there’s president Trump. The unpredictable, outburst-prone business-mogel-cum-politician spent a good chunk of his presidential campaign trash-talking China for unfair trade practices. He blamed China for problems in the US manufacturing industry and threatened to place tariffs on their manufactured goods.

Trump then chose as his trade advisor a man (Peter Navarro) responsible for a book called Death by China: Confronting the Dragon—A Global Call to Action. Navarro’s book is subtle as a bull on roller skates (but less stylish), calling China unscrupulous assassins and accusing the nation of using illegal tactics to destroy American industries.

Trump’s digs at China are confusing considering he has his campaign merchandise manufactured there.

President of the People’s Republic of China, Xi Jinping, will be attending a summit at Trump’s Mar-a-Lago estate in Florida on the 7th-8th of April 2017. Among the issues covered will be manufacturing and trade. Political commentators are hoping Trump will reign in his vitriolic rhetoric but his history gives rise for concern.

“With Trump in the past repeatedly accusing China of keeping its currency at artificially low levels against the dollar and stealing American jobs, the outcome of the meeting is something that remains unknown.”Lukman Otunuga, FXTM Research Analyst

China’s rise as a manufacturing giant

While China has been growing in manufacturing power for decades, it made the official leap into top position in 2010. Since then, United Nations data suggests it has been making massive strides and pulling even further away from its nearest competition.

For an instant, visual understanding of the steepness of China’s ascent, compare its blue line to the other nations represented in the graph below.

That incline represents a 375% growth between 2000 and 2010. But this is not the only way to look at the figures.

Adjusting for population size

Many developing nations outrank the rest of the world in manufacturing growth, even if their productivity is low, because they have a large population. China possesses the world’s largest population (sitting just under 1.4 billion as of 2017). Combine this with a genuinely rapid rate of development and its ability to take out poll position is guaranteed.

The following graph interprets the data differently, dividing the total manufacturing value of each nation by its population to arrive at an evaluation, not just of output, but of productivity. Looking at the data this way, China sits 10th (rather than first) on the list of manufacturing giants.

What we can learn from China’s manufacturing sector

Rather than levelling criticism at China for “stealing jobs”, it’s worth looking at what the country has done to achieve their growth. According to the World Bank, through expanding its manufacturing industry, China has been able to transform its mostly low income population to an increasingly “upper middle income” status.

As the government slowly loosened its grip on the old communist economic model, private ownership became acceptable and, eventually, the private sector blossomed. This has been the major food source for China’s exponential growth. However, China is in a state of flux—politically, economically and socially—meaning this growth is not necessarily sustainable.

While we may see a stall in the steepness of their manufacturing ascent over the coming years, there is still a lot to be learned from China. Manufacturing is a vital industry for providing jobs and maintaining an equal distribution of wealth.

Rather than thinking of China as a threat, nations like the US and Australia would be better served focussing on initiatives that take them out of direct competition with the developing nation. While China dominates in cheap production, this is only one portion of the manufacturing market. Moving to advanced manufacturing processes and encouraging young people into the industry are the best ways to promote growth.