Manufacturing is strength, and therein lies future

The key gauge of China's manufacturing, the Caixin/Markit manufacturing purchasing managers' index, slipped to 47.3 in August, the lowest reading since March 2009 and down from 47.8 in July. Any reading above 50 indicates an expansion in activity while one below points to a contraction.

TB Nair, a friend of mine who's an economic commentator in India, reckons China's manufacturing crisis is likely to deepen. "I don't see the Chinese economy achieving a growth rate of 7 percent this year. Labor costs are rising sharply, leaving the perfect opportunity for India to fill the void in manufacturing," he told me this week.

Nair goes as far as suggesting that India's economic growth rate will surpass that of China by 2016－the kind of prediction which could prove a strong incentive for businesses, including Chinese companies, to relocate their manufacturing operations.

But on the flip side, China's gross domestic product and per capita income are both much more than that of India, and the country remains appealing to inward investors as the living standards continue rising.

Foreign direct investment was just $35 billion for India last year, according to the United Nations, compared with $128 billion in China, according to the Washington Times.

Views of Zhang Jingwei, a research fellow at the Beijing-based Charhar Institute, counter Nair's.

In a recent article, he insisted China has little cause for concern, as it is still streets ahead of India in terms of factory and other industrial modernization.

"We may see some low-end manufacturing moving to markets like India, but high-end firms will stay put in China."

The ball will be volleyed over the net on this subject for months to come. Clearly, opinion is still divided.

But I would be more than happy to go back to the good old days, when big businesses and big enterprises held sway over storms and shocks.

 

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