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Is China the Top Industrialized Country?

Oct 28 , 2013
  • Jin Bei

    Professor and Editor-in-Chief, China Economist

Some scholars have recently argued that “China has surpassed the United States and become the top industrialized country”. However, this claim is not supported by objective assessments of significant facts. By certain criteria, China has exceeded the United States in the scale of manufacturing. In terms of competitiveness, however, China is still far behind.

Measured by “place of origin” or GDP, China may have become the largest manufacturer in the world. However, measured by GNP, China’s gross industrial output becomes much smaller. As a result of economic globalization and the relocation of manufacturing, the United States’ GDP is smaller than its GNP whereas China’s GDP is greater than its GNP. This may be a major reason why some scholars claim China’s manufacturing scale has surpassed the United States’. Yet, in reality, the United States still surpasses China in terms of GDP, GNP and manufacturing scale.

Put in another way, there are more US firms in China than there are Chinese firms in the United States. If we exclude foreign firms’ contribution to the output value of the host country, China may not be the largest manufacturer in the world. In fact, many goods that are “made-in-China” may not actually be “made by China”.

Strictly judged by accepted standards, China is not even an industrialized country yet. As the largest manufacturer in the world, China remains a developing country or an emerging economy. China’s key industries are far from reaching the level of advanced industrial countries. For instance, most of China’s indigenous industries – especially in the high-tech sector – although competitive, still rely on the import of key components.

According to a study conducted by the Institute of Industrial Economics of The Chinese Academy of Social Sciences, China has a long way to go before it acquires any technological advantage and Chinese goods are behind internationally advanced levels in many respects. In one sense, a lack of patience has become a major obstacle, as an increasing number of entrepreneurs in China’s manufacturing sector change their roles to investors and abandon their commitment to manufacturing industry.

Invention and originality are the backbone of a country’s manufacturing industry. Despite China’s great efforts and growing number of patents, the United States still maintains a major influence in key pioneering areas. China continues to have important barriers to overcome in terms of overall industrial performance, innovation, and the social and cultural environment for innovation. Furthermore, the United States continues to attract talented individuals due to its more tolerant business environment and advanced educational and financial systems.

Nevertheless, as a vibrant new economy, China has achieved considerable success over the past three decades. With multiple comparative advantages, China is swiftly catching up with advanced industrial countries such as the United States. As a result, for China, becoming the top industrialized country is a dream that can come true. 

Prof. JIN Bei is the director of Institute of Industrial Economics, Chinese Academy of Social Sciences, and the Editor-in-Chief of China Economist.

Copyright: China Economist



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