Chemical Industry in China's Manufacturing Competitiveness

During the recent Boao Forum, the first Institute of Finance and Economics launched the report "China and Global Manufacturing Competitiveness. The report pointed out that the current competitiveness of China's manufacturing industry based on unit labor costs (the lower the unit labor cost, the more competitive an economy or an industry), the chemical industry ranks first in all manufacturing industries.

Based on China, the report tracks and compares the changes in the competitiveness of 19 manufacturing categories of the world's major economies since the beginning of this century, deeply analyzes the role of technology, system and other factors, and comprehensively evaluates the rise and change of China's strength in the global map.

The report shows that the great changes in China's global manufacturing landscape since the beginning of this century have been accompanied by a rapid decline in market share in developed countries such as the United States, Japan and Germany, while the share of emerging market countries such as China, India and Turkey has risen rapidly. Among them, China's total manufacturing output surpassed Germany in 2005, Japan in 2008, and the United States in 2010. As of 2016, the real value added of China's manufacturing industry reached 7 times that of 2000, and its share of global manufacturing output increased from 8.5 per cent to 30.9 per cent. In this process, China's unit labor cost competitive advantage ranking rose from eighth in the world in 2000 to fourth in 2016. In terms of different industries, the competitiveness of the chemical industry ranks first and fifth in the world. Followed by electrical appliances, electronic communications, automotive, machinery and other industries.

However, the report also pointed out that since the international financial crisis, the comparative advantage of China's manufacturing industry, especially the high-tech industry, has declined, which is reflected in the narrowing of the gap between the unit labor cost value and the global average level, of which the sharp rise in nominal labor cost is the main reason.

Based on this, the report puts forward three suggestions: as the cost of environment and factors is more and more fully included, coupled with the shortage of labor supply, China's manufacturing industry is facing rising labor cost pressure, and efficiency improvement must be accelerated. Second, China should launch an effective policy combination from the strategic level to ensure that its competitiveness is further improved in the field of high and new technology. "Made in China 2025" is an important starting point. Third, due to the deterioration of the global trade environment and the rising probability of trade war, the global supply chain led by China may face shocks, challenges and restructuring. It is necessary to accelerate the reshaping of China's manufacturing industry through the combination of capital, labor, technology and system.