China’s manufacturing

and India‘s services

Updated 25 March, 2014

There is a persistent view that China is focused on manufacturing and India on services.  This may have been so 10-15 years ago. But today, both countries are moving into each other’s ‘specialities’.

 This page is about Chinese manufacturing

China has focused on manufacturing until recently

As more and more western firms moved their production facilities to China to take advantage of the ‘China price‘ helped by preferential treatment in the Special Enterprise Zones, China has become the factory of the world. Initially they made low-priced consumer goods such as t-shirts, trainers, and plastic toys. In her book The China Price: the True Cost of Chinese Competitive Advantage, Alexandra Harney asserts: “The forces that will shape China’s manufacturing sector in coming decades are already clear: rising wages and material costs, greater demand for unionization, a higher risk of litigation, a dwindling supply of cheap workers, calls for better product quality and safety, and substantial downward pressure on margins.” In 2007 it manufactured £1.1 trillion worth of products.

Top end 

Over the years as quality and competence of Chinese factories and workers improved, luxury goods such as Mercedes and BMW are being manufactured in China, along with high-ticket electronic goods. Indeed, VAG entered China in 1978 and is now one of the top car makers in China and exports to other Asia-Pacific markets.

Consequently, China is amongst world’s top consumer of cement and steel. Another example is that of chemical plants: in 2005 50 new plants worth over $ 1bn were installed. And that has not slowed much in the years since.

There is also local enterprise. Take for example Zhong Guancun. Thirty years ago it was a quiet suburb of Beijing with mostly green fields and some universities. Twenty years ago, small computer companies appeared outside the universities probably run by ex-students. Ten years later it grew into largest and most vigorous IT Park in China. 77% of companies set up here die in 3 years and many of rest die in another two, but nothing can stop more from starting and trying to grow.

In 1984, a Liu Chuanzhi started a small company there called Legend, with only $25,000 and 11 employers. Today, after taking over IBM‘s PC division in 2005, it has grown into 25,000 employers and turnover of $15bn. Its name was changed to Lenovo. It has over 35% of China’s PC market and 7% of the world market in 2009.In 2011 it grew to become the world’s third largest PC maker.

Although not in the same league as Boeing or Airbus, the Commercial Aircraft Corporation of China (Comac) has started to deliver 60 to 100 passenger jets competing with Bombadier and Embraer. These sircraft will be the workhorses as most of the new aiports in China will not be in large cities and hence will not be designed to take super jumbos.

Other end

At the other end of manufacturing is the story of Yiwu. It was a small town in Zhejiang one of the most densely populated provinces, which includes Shanghai. It was early adopter of market economy and from 1982 it gradually turned itself into a huge manufacturing and marketing centre of consumer goods, from needles to pencils to Christmas kitsch. There are very few things you can’t find here. Those you can’t find and want will be made for you. With over 60,000 vendors stocking 400,000 varieties in 1,700 categories of commodities made and sold here, things here are incredibly inexpensive. The Yiwu Index is now one of the main deciding factors on the world price for the small commodities. Even so Yiwu makes $5.4 billion profit a year.

So, the majority of the goods made in China are relatively low-priced consumer goods such as t-shirts, trainers, toys and consumer electronics. One of the world’s largest container ships, Emma Maersk used t