A recent report by investment bank UBS cites China is now the world’s leading tech and electrical equipment exporter.
The bank says China’s future market share gains are somewhat limited, but the ability for China to move further up the value chain is likely by gaining in sophisticated manufacturing industries, which should be helped by China’s rising R&D investment and innovations, as well as overall large market size. (See: China increasing demand for automation drives robot sales)
Industry sectors with the best growth potential for China are industries (i) where China still sees relatively large gaps with global front runners; (ii) where active R&D investment and activities are taking place; and (iii) sectors where there is considerable market growth potential, sectors that are most promising in China today and, many of which the government also plans to promote such as nano technology, artificial intelligence (AI), and LCD and OLED in the tech sector; electronic vehicles and batteries in the auto sector; home appliances in electrical equipment; and aerospace and space industries (transport equipment).
China manufacturing industries with best growth potentials today
In the report, UBS writes the most striking outcome from China’s rise is the nation’s impact on the dramatic shift in the global manufacturing landscape.
Among major manufacturing exporters, Japan and the US have lost significant market share. In 2000, Japan was the third largest (9.1% global market share) manufacturing exporter when measured by final products and, second largest (11.4%) when measured by value-added. By 2014, however, its global market share declined to 4.9% (final products) and 6.4% (value-added) respectively. The US used to be the largest manufacturing exporter in the world but by 2014, it had fallen behind both China and Germany, becoming the number three exporter with global share of 7.5% and 9.8% when measured by final products and value-added respectively.
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USB cautions it would not be entirely correct to interpret such an outcome as the two economies losing to China though, because: (i) both countries still had positive growth of manufacturing exports during 2000-14 (averaging close to 4% annually for the US and slightly above 2% for Japan), and (ii) to a certain degree, it also reflected a trend among many developed economies to move to services and higher value-added sectors while outsourcing mass manufacturing overseas, in particular to emerging market economies.
Meanwhile Germany and Korea stand out as retaining or gaining market share in global manufacturing exports. There could be a number of factors behind their success and the bank only implies innovation and R&D investment may have played a critical role. In addition, their ability to tap into China’s growing market for capital goods and automobiles may have also been important.
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