When it comes to manufacturing spending, it’s China and other countries.
U.S. manufacturers are waiting for their government to subsidize their industry in a way that matches China’s aid, and they will be waiting a very long time.
This is not a comment on US policy. A clear view of the miles-long crater between China’s approach and those of other countries. China is like that, wall street journal Lately, it has been said that government funding for manufacturers is on a “other level”.
They are like the children of an international trust fund, and we are the sneaky underdogs who have to work for every penny. The playing field is very uneven and looks like a seesaw. But American manufacturers can’t just give up and get out of the sandbox, so here’s what they can do.
When it comes to manufacturing spending, it’s China and other countries
The United States is one of many countries that has spent tens of billions of dollars on manufacturing in recent years. But it hasn’t even begun to affect government spending in China, concludes a recent article on inequality. wall street journal.
According to the Center for Strategic and International Studies (CSIS), China’s industrial spending in 2019 reached up to $250 billion, equivalent to about 1.7% of gross domestic product. This compares to the 0.4% of GDP that the United States invested in manufacturing in the same year.
But the full effect of China’s aid to the industry will likely exceed that 1.7%, and perhaps significantly more. Given the government’s “generous policies and extensive methods of accounting for cheap credit and national investment funds,” according to a 2022 report by Scott Kennedy, co-author of the 2019 report, China’s support for manufacturing could reach 4.9% of GDP. CSIS analysis.
What does generosity look like? In addition to simpler subsidies, Chinese companies “receive cheap loans from China’s state-owned banking system and significant tax breaks,” the paper writes. WSJ. “They also get cheap land from local governments to set up factories, cheap steel from state-owned factories, and cheap energy from state-owned power companies. We provide billions of dollars in equity financing to companies that
Of course, the United States has made progress in recent years. In early 2023, in the wake of the pandemic’s disruption, President Biden signed the CHIPS Act, which set aside $280 billion for manufacturers. Of that amount, about $53 billion will go to subsidies to chip makers, $10 billion to the Department of Commerce to create 20 regional technology hubs, and $200 billion to new initiatives and research in areas such as AI, robotics and quantum computing. Used.
But in terms of absolute numbers, the United States has no chance of matching Chinese investment.
How can American manufacturers compete?
With such a gap between China’s spending and the rest of the world, what should we do? This is not a call for the United States to match China’s spending levels. But the message is not that U.S. manufacturers should sit on their hands.
Instead, we need to take a calm look at what we are facing and adjust our approach accordingly. There teeth unfair advantage. Because of the nature of the state aid provided, the average Chinese manufacturer will have much newer and more advanced equipment than their American counterparts.
As cliché as it may sound, American manufacturers need to continue to pick themselves up. Our industry was built on that pioneering, through-all-adversity spirit, and we need it now more than ever. That means accessing capital to aggressively reinvest in the factory. If it’s not sitting in your company’s safe, go find an investment partner. Private capital is readily available and generally keen to invest in technology-first manufacturing.
Three best areas to invest your money for the best returns:
1. live data tracking: Often the first step for manufacturers exploring new technology, live data tracking involves equipping the manufacturing floor with sensors that monitor operations in real time. The payoff is in two parts. Manufacturers can now track and analyze machine performance and become more proactive with maintenance and upgrades. And you’ll have the data and insights to guide and enable your future technology investments.
2. robotics: It’s not for the future. That’s it for now. Deploying robots and cobots can deliver significant long-term cost savings and improve team productivity and safety.
3. Improve talent and retention: We cannot forget our most important asset, our employees, now and forever. Invest money in improving your factory environment, increasing pay, and improving your culture by adding activities outside of work, giving your employees more flexibility, and upgrading your equipment.
Creating an investment roadmap can help you take the right first steps, prioritize, and balance short-term wins with long-term strategic decisions.
It’s clear that to remain competitive, we need to work together to raise the stakes, and that means improving our in-store technology. In terms of scale and output, American manufacturing cannot compete with China’s affluent approach. But we can still build the manufacturing industry we need to power our future.
as WSJ He points out that industrial companies based in the West have other advantages, including “deep capital markets, world-class research universities, strong intellectual property laws, and…a culture that values innovation.” Since it is costly and inconvenient to have management teams travel back and forth to check operations in China locations, I would like to add to the list that manufacturers operating locally also have an inherent advantage. And because by and large, even in 2024, all else being equal, Americans still prefer to buy American products.
To take full advantage of these American advantages, manufacturers must make urgent investments in technology. That way, they will continue to grow in the face of tremendously well-funded global competition.
