From 'Made in China' to 'Made by China for China'

Manufacturing dominance, home market could limit blow from U.S. protectionism
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How Made in China for China Could Impact Trade

China remains the biggest manufacturer on the planet, but most of what it makes stays at home and the vast majority of what it consumes is made there, too.

These twin facts could confound any Donald Trump-led trade assault, according to Diana Choyleva, London-based chief economist at Enodo Economics.

Of course, China remains deeply knitted into the global supply chain. "But the bulk of the value added is actually destined for China’s domestic market rather than abroad," Choyleva wrote in a recent note.

In fact, in 2011 less than a quarter of total domestic valued added by China's manufacturing sector was bound for foreign markets, down by 5 percentage points since 2008, according to the most recent data available from the Organization for Economic Cooperation and Development. To be sure, some sectors still rely heavily on foreign demand, including electronics, textiles and apparel. But most don't. 

This chart from Enodo demonstrates their point: 

Meanwhile, foreign content in China-produced goods now only makes up 10 percent of final consumption in China. So while the U.S. could reduce its Chinese imports via protectionism, it is unlikely to export more to China unless it focuses on services, Choyleva said.

Beijing also hopes to produce more of the components it needs to make final products, whether for the home market or overseas.

Choyleva points out that under the new "Made in China 2025" program, the goal is to raise the domestic content of core components and materials to 40 percent by 2020 and 70 percent by 2025. "Beijing wants to transform 'Made in China' to 'Made by China' with the purpose of reducing its vulnerability to a disruption of global supply chains," she wrote.

 

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