China's Manufacturing Edge Might Just Be An Illusion

Interesting op-ed piece in the Wall Street Journal (as usual, you have to be a subscriber to read it online) that suggests that all of China's recent problems with contaminated toothpaste, dangerous toys and defective tires is the silver lining to the cloud hanging over U.S. manufacturing: namely, that China's "edge" in manufacturing may in fact be an illusion.

In a column titled, "The China Syndrome," Jeremy Haft writes, "reed factors into why Chinese suppliers make defective, even harmful products. But often it's because of just plain ineptitude."

Haft, who's written a book I haven't come across yet, observes that most Chinese factories aren't the industrial juggernauts that drove Japan in the 1980s; instead, Chinese manufacturing is made up of "hundreds of thousands of tiny factories and farmsplus traders, brokers, haulers and agents, all of whom take control of the goods and materials but add little value to the product." He pooh-poohs the thought that Americans will be driving Chinese automobiles within the next two years, pointing out that just because they can build factories doesn't mean they can build cars that meet international standards of quality.

Haft also points out that most of the cheap goods coming into the U.S. from China are in fact assembled from American-made components and raw materials, so there is at least some give-and-take going on (I'm not quite sure I buy the argument that poorly-made knockoffs are okay as long as they have some American stuff inside them).

Though he's largely preaching to the choir, writing as he is in an American newspaper, Haft concludes by asserting that the United States' main assets are its innovators and entrepreneurs, and that it's our ability to create new products that will keep and create jobs in the U.S. in the days and years to come.

Footnote: In the same edition of the WSJ, but in the news section, it's reported that China could become the third-biggest economy in the world (behind the United States, at $13.2 trillion, and Japan, at $4.4 trillion), nudging aside Germany for that third slot. Germany is currently at $2.9 trillion and China at $2.8 trillion. The article notes that just eight years ago, in 1999, China was the seventh-biggest economy.