By Ding Gang
The key to US President-elect Donald Trump’s slogan “Make America Great Again” is to revitalize US manufacturing industries. However, slogans cannot guarantee that the US will dominate the global manufacturing chain as it used to.
Asia is now in a leading position in the manufacturing chain. It has a well-developed production system and value chain. The comprehensive growth of China’s manufacturing industry contributed to this.
US President Barack Obama also has the ambition to revitalize the US. One important purpose of promoting the Trans-Pacific Partnership (TPP) was to elevate the US position in the global manufacturing chain, or in other words, to help the US regain its lost position.
The US is the world’s biggest consumer market, which enables it to reshape the manufacturing chain. By advancing the TPP, the US hoped that it could shift the manufacturing chain from China to other TPP members, and attract US overseas businesses back to US soil and reinforce the US role in the global manufacturing chain.
However, many US research institutions have found out that the TPP cannot help the US back to the top of the manufacturing chain, instead, it will facilitate more foreign products and services to enter the US market and aggravate the US unemployment rate. That is why Trump decided to repeal the TPP.
It is almost impossible to revitalize US manufacturing in this way. Many production chains have been completely transferred to Asia and the US cannot provide cost-efficient labor. The US is unable to find replacements for these key elements.
With the wide application of robots, some industries might go back to the US, but it is almost impossible to rebuild entire chains for manufacturing industries. The US will continue relying on China-led production chains in Asia.
SoftBank has announced a plan to invest $50 billion in the US. With the $100 billion SoftBank Vision Fund, the plan will spend heavily in fields including Internet of things, artificial intelligence, deep learning and robotics. The development of these new areas, however, will not increase jobs, but make the job market more stagnant.
But the US will invest more resources in high-end manufacturing industries, enhancing its advantages in military industries, medical science, information technology, aviation and aerospace.
Without the TPP, the US can take advantage of its market and move some production chains out of China, and manipulate the global manufacturing chain. For example, by using methods such as anti-dumping, anti-subsidies and quota regulations, the US can force companies to move their production lines out of China.
In the meantime, the US will make the most of its strong capital to control these production lines. In fact, this is also the investment direction of many US companies.
In face of competition from the US, China needs to put more efforts into consolidating and optimizing the current framework of production chains. Some Chinese companies have started to move their production from the Chinese mainland to other Asian countries. For example, Huawei, China’s leading telecom manufacturer, is building its mobile phone production lines in India.
China can lead and expand Asia’s production lines in three aspects. First, China can make the Asian market bigger and stronger. By grasping consumers’ needs, Asian countries can take the initiative to modify production chains. Second, by relying on China’s well-established manufacturing system, they can put more efforts in research and innovation to ramp up their position in the global value chain. Third, by using financial and technological means they can control and modify the layout of the manufacturing industry. China can also transfer some of its middle and downstream production lines into other Asian countries.
To consolidate and improve Asia’s position in the global production chain is in line with what Asia’s emerging economies demand. It is also the key to the robust development of the “Belt and Road” initiative to benefit countries along the route. An interconnected Asia in manufacturing industries will be a major impetus to the rise of Asia.
(The author is a senior editor with People’s Daily, and currently a senior fellow with the Chongyang Institute for Financial Studies at Renmin University of China. email@example.com. Follow him on Twitter @dinggangchina)