Sunday, March 6, 2016

Memo To Trump: China Threat is Innovation, Not Manufacturing

What do the Chinese government and a would-be Trump administration have in common? Both want China to rely less on unskilled jobs in manufacturing as an economic driver.
China recognizes that its economy, based on manufacturing, is unsustainable. For one thing, manufacturing requires massive electricity, and the country’s coal-reliant electricity generation is polluting the air and killing its people.
More, low-skilled manufacturing also requires low-wage workers. China’s former one-child policy, together with its economic growth, have produced double-digit annual wage increases and a shortage of workers. Manufacturers seeking low-cost assembly work are increasingly turning to Malaysia and other countries in Southeast Asia.
Meanwhile, Donald Trump – oblivious to how other countries and cultures operate – wants to force companies such as Apple out of China by imposing tariffs or mandates for U.S. manufacturing.
Never mind that the president has scant legal authority to do so, and Congress – even a Tea Party Congress – is unlikely to give the president authority to require domestic manufacturing. Trump will harrumph and bloviate his ignorance, with television news giving each inane pronouncement attention it doesn’t deserve.
Chinese Students in America: 300,000 and Counting
But the bigger, more important story is that China is shifting its strategy away from manufacturing. China’s next five-year plan will be released this month, and I understand from a senior communist party member, it will include a big focus on innovation.
The government is expected to create programs to subsidize innovation by both small and large companies, and may give millions to the information and communications technology sector and other industries considered “strategic.”
More, the Chinese will likely cut corporate income taxes in part by creating a research-and-development tax credit.
Read the rest of Gary Shapiro's op-ed HERE.

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