China cost advantage over US manufacturing nearly gone

The unit labour cost difference China has enjoyed over the United States has shrunk, according to figures from Oxford Economics.

A study for 2003 – 2016 found that, when productivity is taken into account, China enjoyed an advantage of only 4 per cent over the United States.

CNN Money points out that the Chinese yuan has risen against the US currency for most of the last decade, while wage rises in China have outstripped productivity.

"Although U.S. manufacturing is currently facing meaningful headwinds from a stronger dollar and the collapse in investment in the shale energy sector, it remains the most competitive worldwide," Bloomberg quotes analysts Gregory Daco and Jeremy Leonard as having written.

By unit labour costs, Australian manufacturing is over twice as expensive as the USA’s, though it was over three times as expensive in 2012.

For 2003 – 2016, output per worker rose 40 per cent in the US, 25 per cent in Germany and 30 per cent in the UK.