US' Intentions to Re-Cut the Global Wealth Map

Three years ago, when Obama came before the G-20 summit in Pittsburgh putting forth a slogan of global economic rebalancing, many Chinese people believed that it was an American attempt to divert the international community. They believed Obama was creating diversions by arranging for a tactical reform of the financial system. However, in recent years, it has been shown that the U.S. is genuine in this case. On one hand, the U.S. continues to get help from China’s power for its stable economic fundamentals. On the other hand, through the launch of a new industrial revolution, it is attempting to re-occupy the global economic system’s high points. American financial leaders also decided to change its economic development preferences over the coming years.

The U.S. is well-aware of the excessive pursuit of the financial industry’s development in the past. Moreover, relying on the U.S. dollar as the standard and the globalization dividend method is not conducive to the continued prosperity and stability of the U.S. economy. Especially after the enhancement of the China’s economic competitiveness by abandoning preferences for “financial witchcraft,” there has been an emphasis on real industry and exports. This is to reverse the decline of the United States in international economic competition. Indeed, the financial sector is overdeveloped, and this has a very strong negative effect. Manufacturing represents real industrial development. A longer industrial chain can achieve a reasonable distribution of wealth, which is especially important in raising the employment rate.

One of the significant signs of the U.S. layout of economic transformation is the cultivation of the industrial revolution and technological progress. From a historical perspective, often the most difficult economic period is the critical time when there is a preliminary round of exploratory discussions regarding technology and the industrial revolution. Economic recovery after a crisis, in addition to the macroeconomic policies to stimulate the economy, often result in new technologies and new industries. Today, big data, smart manufacturing and the Wi-Fi revolution are representatives of the third time that technological change is brewing and beginning to take shape in the U.S. If these three representatives of the new technological revolution are able to set off a new round of industrial revolution (plus the Apple platform is speeding up the economy and extending market boundaries), the U.S. industrial system will create a new engine of economic growth in the next decade.

After China surpassed them in the field of traditional manufacturing industries, the United States vowed to maintain a leading edge in high-end manufacturing. High-end manufacturing is the core objective of the U.S.’ “re-industrialization” strategy. The United States has officially launched a high-end manufacturing plan. In the fields of nanotechnology, high-end batteries, new energy, the new generation of microelectronics research and development, high-end robots and other fields aiming to increase investment in science and technology, the United States intends to promote the development of high-end talent, essentials and innovation at home. The U.S. also wishes to maintain its lead in the research and development in the field of high-end manufacturing, leading technologies and manufacturing leadership. Leading research and development infrastructure, the advantages of financial services as well as a wealth of new experience in the technology industry make it possible for the United States to again occupy the high points of the new round of the global industrial system of labor division.

With the weakening of China’s cost dominance, more and more U.S. companies are considering the move of production bases originally located overseas back to the U.S. “Made in the USA” cost dominance is emerging. The British Financial Times reported that from early 2010 until now, U.S. manufacturing employment grew by 2.9 percent. Germany and Canada’s rate increased by 2.4 percent and 1.9 percent respectively. From 2002-2010, U.S. manufacturing unit labor costs in dollar terms fell by 11 percent. Japanese and German manufacturing unit labor costs in U.S. dollars rose by 3 percent and 41 percent respectively. In a recently released report, the Boston Consulting Group believed that in the next five years, it is most likely that manufacturing industries returning to the U.S. will include means of transport, electronic equipment and instruments, furniture, plastic and rubber products, machinery, metal products and the computer industry. Nearly 70 percent of the merchandise in these categories of goods accounted for U.S. imports from China. On average, U.S. consumers’ annual consumption of these goods amounted to $2 trillion.

Over the past decade, China’s manufacturing industry has obtained remarkable production abilities. In 2010, manufacturing output in China surpassed the United States’ for the first time. It accounted for 19.8 percent of global manufacturing output and was among the “world’s first,” leading the U.S. by 0.4 percentage points. China is also regarded as one of the few countries that has a global manufacturing sector that is high, medium and low, representing a relatively complete industrial chain.

The recent series of economic competitiveness in the U.S. economy is based on forging strategic considerations. If, while the United States is restructuring its entities of industrial competitive advantage, there is successful devaluation of the American dollar, the appreciation of the yuan will achieve rapid growth in exports. This may not only break the American consumer with Chinese production’s division of labor, but it will also greatly squeeze China’s core interests in the global value chain. On the other hand, if the United States were to make a major breakthrough in the field of new energy technology research combined with its still powerful advantage of financial services and its rich experience in the industrialization of new technologies, the United States would undoubtedly turn to build a new economic high wall against China. This is all when China is not only finding it difficult to economically compete with the United States as equals. This also will create a situation of loss for the original owners of traditional economic advantages.

In the future, while China is increasing investment in human capital, it should lead the overall industrial structure’s upgrade of prospective technical inputs and high-quality technological innovation. At this stage, some possess relative competitive advantages in enterprises that should be on the foundation of undertaking international technology transfer. This will improve the status and quality of Chinese enterprises in the global value chain. China should focus on the end of the financial crisis. Opportunities and challenges in the global industry may reshuffle. Efforts to enhance the financial markets, research and development designs, systemic integration and other professional services’ capabilities, the strengthening of financial services, technology supply, operational management functions and, in particular, the ability to manage the global supply chain are all key technology investments that will increase strategic emerging industries.

Innovative environment, financial services and its supporting policies, as well as new technology industrialization (and other aspects) will maked up for missed lessons as quickly as possible. We should reduce barriers to market access as soon as possible and promote market-oriented reforms of factor prices. In addition, we should stimulate the market’s main business endowments and enthusiasm in technological innovation. This is all with a view to achieve breakthroughs in core technology bottlenecks in key industries. This pertains to China’s future status with regard to international divisions of labor. The formation of industrialization should also be considered. Ultimately, this is all to create a group that can support the long-term competitive advantage of China’s economic cross-industry.