Changing Patterns of Global Manufacturing

Changing Patterns of Global Manufacturing
1. Lower labor costs account for more than a half of China’s price advantage; this is because it has greatly reduced the labor component directly. In addition, the productivity of the workers in coastal mainland China and its environs is higher as compared to many other nations; this can be seen in the fact that the Chinese manufacturers, for example, can save more than fifteen cents on the manufacturing dollar for their labor costs. This is due to the rapid economic growth in the Asian countries and the tight labor markets. In addition to this, This increase in productivity has in the long run adjusted the Chinese wages.
2. Most regional and national economies develop more in clusters than in isolated industries. For example, the Pearl River Delta region in Huizhou has developed broad range of clusters in garments, electrical goods, plastic products and textile, this is because the cluster is strong and accounts for the majority of Chinese production in many industries. The industrial network clustering of the industries generates significant distribution and production benefit as it speeds information, provides direct cost reduction benefits to the price, reduces transportation, fixed and operating costs
3. Some of the factors that have an impact where US companies manufacture goods are such as the currency strength,this is because the value of the US dollar as compared to other currencies is more important for companies that don’t export or import goods.

Interest rates also impact the companies as an increase in the interest rates may prevent customers from borrowing to finance the purchase of the products. Falling interest rates will lead to higher employment levels. In addition, government intervention impacts the companies because the industries are regulated by the government. However, some industries are more regulated than others.
4. Manufacturing is not monolithic because some of the manufacturers are more labor intensive while with others; the proximity to customers is the critical issue. In the USA, it is evident that manufacturing promotes productivity, trade and innovation than growth and employment. Thus as a result of the ongoing productivity improvement, force of global competition and faster growth in services pushes advanced economies to specialize in activities that require a lot of skills.Thus, manufacturer’s share of employment remains under pressure, thus with more manufacturing done in USA, it will create fewer jobs.