Impressions from China

Anyone who has recently visited China cannot help but be impressed by the industrial powerhouse it has become. In fact, China's demands for fuel and raw materials to satisfy its burgeoning industrial growth have led to many of the shortages and higher pri

Anyone who has recently visited China cannot help but be impressed by the industrial powerhouse it has become. In fact, China's demands for fuel and raw materials to satisfy its burgeoning industrial growth have led to many of the shortages and higher prices that the U.S. industry has seen in recent months. Whether steel, copper, cement, or oil, there is a strong demand for these products in world markets because China is continuing to grow at annual rates approaching 10%.

Having visited China regularly over the past 15 years, I can attest that the rate of change is mind-boggling. The narrow, bicycle-filled roads of a decade ago have given way to wide streets and highways choked with automobiles. Cities such as Beijing, Shanghai, and Guangzhou now have mile after mile of newly constructed high-rises, many not even occupied but being held as speculative investments.

Even more striking, from the point of view of U.S. manufacturers, are the miles of new industrial parks, filled with modern factories. These facilities are not turning out products with primitive handheld tools, nor are they dependent on an unending pool of cheap labor.

Rather, what the AMT Board of Directors saw as they toured these factories were efficient assembly lines using modern machine tools and production equipment, effectively managed by well-schooled individuals. In one machine tool plant we saw, one-third of the employees were engineers working on modern computers with recent CAD/CAM programs.

China passed the U.S. in machine tool consumption in 2002 and will likely be more than twice as big a market in 2004, a fact that strongly indicates the rapid growth of its economy. With 1,000 new automobiles being put on the road every day in both Beijing and Shanghai, I understand General Motors' recent decision to invest $3 billion more in China over the next few years. And the aircraft industry is expanding at an equal pace. Whether or not any of these products come back into the U.S. will depend on China's continued ability to grow at the dizzying pace of the past decade.

From a U.S. perspective, manufacturers have to question our government's stance regarding China trade policy. As a large, rapidly growing market, China poses both an opportunity and a threat. The threat is obvious, with more jobs being created in Canton, China, than in Canton, Ohio. But I fear the U.S. is squandering a tremendous opportunity by pursuing shortsighted policies regarding China. For example, our export control policy prevents U.S. companies from exporting certain technologies to China. Meanwhile, the Chinese are buying their equipment from the Europeans, who do not share our view of China as a potential military threat. And though our immigration and visa policies were designed to keep potential terrorists at bay, they also serve to keep Chinese capital-equipment buyers away from our plants and tradeshows.

But most importantly, our trade and currency policies have let the Chinese gain a critical early advantage in trade and inward foreign investment. They may never relinquish that advantage when the issue is finally addressed and the Chinese currency is allowed to float in international markets as every other major currency does.

As Pogo used to say: "We have met the enemy, and he is us."

By Dr. Paul Freedenberg Vice President Government Relations AMT—The Association For Manufacturing Technology

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