Caixin
Mar 04, 2021 09:13 PM
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Chart of the Day: China Retains Crown as World’s Biggest Manufacturer

China remained the world’s manufacturing powerhouse last year as its factories made a strong recovery from the impact of the Covid-19 pandemic and overseas demand for medical equipment and work-from-home-related consumer goods surged.

Output from the country’s manufacturing sector rose 2.3% to 26.6 trillion yuan ($3.85 trillion) in 2020, data from the National Bureau of Statistics (NBS) show. Although the growth rate was about half the 4.6% pace seen in 2019, the world’s second-largest economy is certain to have retained its No. 1 position given the size of the gap with its nearest rivals.

China has been the world’s largest manufacturing nation for 11 straight years, Xiao Yaqing, head of the Ministry of Industry and Information Technology, said at a briefing (link in Chinese) Monday. The country knocked the U.S. off the top spot in 2010 when its output jumped 18% in nominal terms to 13.03 trillion yuan, or $1.925 trillion. That year, production in the U.S., the world’s largest economy, rose 5.6% in nominal terms to $1.797 trillion, figures compiled by economic data provider CEIC show. China overtook Japan as the second-biggest manufacturing nation in U.S. dollar terms in 2007.

COTD Chart

China accounted for 28.7% of the world’s manufacturing output in 2019, data compiled by the United Nations show. That’s more than the combined share of the second- and third-biggest contributors –– the U.S., at 16.8%, and Japan, at 7.5%.

The growth in China’s manufacturing output in 2020 was the weakest as millions of factories shut down in the first quarter to prevent the spread of the coronavirus that causes the potentially deadly Covid-19 respiratory disease. Production gradually recovered from the second quarter as the economy reopened, supported by the government’s relief and stimulus policies. These included lowering business costs such as social insurance contributions, providing tax breaks, and allowing small and midsize enterprises hit hard by the pandemic to delay loan repayments.

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Governments around the world closed their economies to varying degrees, leading to a collapse in global demand. But while many Chinese exporters suffered, others saw a boom from the sale of personal protective equipment such as gowns and masks, medical devices, and consumer goods such as leisure clothing and equipment, and work-from-home products such as desks, chairs and computers.

For 2020 as a whole, China’s goods exports in dollar terms rose 3.6%, faster than the annual GDP growth of 2.3%. In December alone, exports jumped 18.1% year-on-year. Exports of medical and pharmaceutical products jumped 27.9% last year.

But it’s not all good news. Growth in manufacturing investment has been softening since 2011, falling from 31.8% that year to 3.08% in 2019. The decline is partly due to controls on spending in industries facing overcapacity and partly because China has moved up the value chain and the economy has matured.

The structural shift in the economy toward services has also led to a drop in the contribution of manufacturing to GDP. Value-added manufacturing output accounted for 26.2% of nominal GDP in 2020, down from 30.7% in 2013, NBS data compiled by CEIC show. Although the decline is inevitable, such a rapid fall in a relatively short period of time is problematic, especially when China’s per capita income has only just reached around $10,000, Yang Weimin, deputy director of the economy committee of China’ top political advisory body, the national committee of the CPPCC told Caixin (link in Chinese) in a recent interview. He noted that the contributions of the property and finance industries have risen rapidly, which has had a negative impact on the economy.

A draft of China’s 14th Five-Year Plan, which will be put to lawmakers for approval at the National People’s Congress which starts on Friday, proposes (link in Chinese) that the share of manufacturing in the economy should be kept basically stable over the next five years and that the government should promote balanced development between the property and finance sectors on the one hand and the real economy on the other.

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Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)

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