China is losing more manufacturing jobs than the United States. For the entire
economy between 1995 and 2002, China lost 15 million manufacturing jobs,
compared with 2 million in the U.S., The Conference Board reports in a study
“As its manufacturing productivity accelerates, China is losing jobs in
manufacturing – many more than the United States is – and gaining them in
services, a pattern that has been playing out in the developed world for many
years,” concludes The Conference Board study.
According to Robert H. McGuckin, Director of Economic Research at The Conference
Board and co-author of the study: “Increased unemployment has also accompanied
the restructuring of the industrial sector, but per capita income has risen over
The new report from The Conference Board, the global research and business
membership network, is the result of a joint research project with The National
Bureau of Statistics of China. The study is based on data for the 51,000 large
and medium sized firms in China’s manufacturing, mining and the utilities
industries. While the study focuses on the larger firms, according to McGuckin,
“the same patterns are observed among smaller firms.”
China is rapidly losing manufacturing jobs in the same industries where the U.S.
and other major countries have seen jobs disappear, such as textiles. Matthew
Spiegelman, Economist at The Conference Board and co-author of the study, notes:
“The U.S. lost 202,000 textile jobs between 1995 and 2002, a tremendous decline
by any measure. But China lost far more jobs in this sector –1.8 million. All
told, 26 of China’s 38 major industries registered job losses between 1995 and
The study points out that while developed countries’ jobs are being offshored to
China, exports are only one piece of China’s industrial expansion.
Says The Conference Board study: “The rapidly growing domestic Chinese market,
which has developed a voracious demand for goods and services from both local
and imported sources, has fed China’s economic boom.”
China’s Industrial Productivity Rises
China’s industrial labor productivity growth exploded at a 17% annual rate
between 1995 and 2002. As in the more developed countries, this rise in
productivity comes from improved technologies and the reallocation of resources
from lower to higher value activities.
McGuckin states that “continued restructuring within the industrial sector as
well as from shifts to services should lead to further productivity increases
and improved incomes.”
The advances in productivity are broad-based across the industrial sector, with
36 of the 38 major industries experiencing increases between 1995 and 2002. In
fact, 27 of the 38 saw annual average productivity growth of over 10% (compared
to just 4% in U.S. manufacturing over the same period).
China’s industrial growth comes from both the downsizing and restructuring of
government firms and the upsizing of foreign and foreign-invested firms as well
as private domestic Chinese firms. Both the foreign and government firms
increased labor productivity by similar magnitudes. The private domestic firms
showed somewhat slower, but robust productivity growth of 9% and much faster
Because foreign and foreign-invested firms are upsizing, they are responsible
for an increasingly large share of China’s industrial output and productivity
growth. These firms, which include both joint domestic-foreign partnerships
(79%) and pure foreign enterprises (21%) accounted for 34% of the output in
2002. While their share of industrial output plummeted from 64% in 1995 to just
30% in 2002, state-owned firms remain an important force in China’s industrial
economy. Domestic private firms increased from 8% to 29% of output in 2002.
Other Key Findings:
The impact of job losses has been widespread across the industrial sector. In
addition to the losses in textile manufacturing, industries with the highest job
losses included steel processing (557,000), machinery (588,000), and non-metal
mineral products (429,000).
This pattern of job loss is repeated across the manufacturing sector. The only
three manufacturing industries showing any substantial job gains in China are
electronics and telecommunications (374,000), garments (160,000), and leathers
and furs (129,000). Most of these positions were in firms involving some kind of
The pace of downsizing has been extremely fast at state-owned enterprises, in
particular, with over 12 million jobs lost between 1995 and 2002 in the
industrial sector alone. While the upsizing of private sector enterprises was
substantial – almost 9 million new jobs – the net loss in jobs in China’s
industrial sector was still over 4 million jobs. While there has been much
discussion about offshoring high-wage jobs from the U.S. to low-wage countries
like China, the loss of large numbers of manufacturing jobs is actually
occurring in both countries simultaneously.
Source: China’s Experience with Productivity and Jobs:Benefits and Costs of
Change Report R-1352, The Conference Board.
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