China’s economy is growing at an astonishing pace.  For each of the past 25 years, it has grown 9 percent or more - the fastest growth rate on record for any major economy.

Most of increase can be attributed to China’s booming manufacturing sector.  Producing the majority of many of the world’s products and consuming much of the world’s natural resources, China is at the forefront of the world manufacturing marketplace.

What are our Chinese counterparts doing to sustain this unprecedented growth? And how can American manufacturers keep up? 

China's prudent investments

Chinese manufacturers are pouring money into their businesses to foster further growth and advancement in the industry.  In fact, Chinese manufacturers are investing seven times more sales revenue on capital equipment than U.S. companies. They are also outspending U.S. companies on information technology investments by a three-to-one margin.

Chinese manufacturers are also investing in people. Each year, the number of engineering graduates in China increases, and most of them are employed by the manufacturing sector. This highly educated workforce then goes on to receive more job-related training than the average American manufacturing employee.

Chinese manufacturers are building teams of highly skilled employees who have access to the latest technology and equipment. By investing in both people and physical assets, they hope to improve in the areas of product innovation and quality control that have been shortcomings of Chinese manufacturing.

American advantages

Chinese manufacturers have proven that they are viable competitors in the global marketplace.  That said, American manufacturers maintain a few distinct competitive advantages. 

Customer understanding and geographic location are two factors that uniquely position American manufacturers to deliver products designed specifically to their customers’ needs.

China dominates the low-cost marketplace with an emphasis on producing bulk at an affordable price. However, this Wal-Mart approach to manufacturing is not attractive for all customers. In the United States, demands for customization and added services are typically better served by U.S. manufacturers. Geographic proximity also aids quick delivery schedules; rush orders are nearly impossible for China’s manufacturers to deliver. 

Another trend in the U.S. marketplace is the continued demand for services paired with product. Customers want to simplify their experience as much as possible, and that often means purchasing a service to compliment the product. This is not currently offered by Chinese manufacturers, and American manufacturers can continue to win business by wrapping desired services around their product offerings. 

Maintaining the upper hand

How can American manufacturers remain competitive going forward? For starters, companies need to revisit the core skills that helped American manufacturers dominate industrial markets: science and technology. Innovation will continue to be a U.S. trump card.  Geographic and cultural separation, as well as unsophisticated practices, do not favor the Chinese when customers are looking for cutting-edge processes. 

Efficiency gains will also continue to help American manufacturers hold their ground.  Through a dedication to a continuous improvement culture, manufacturers will refine systems, processes, and practices to create greater cost-saving efficiencies.  Competitive prices coupled with added services and faster delivery will encourage U.S. customers to choose domestic goods and services. 

China’s manufacturing sector will continue to grow and pose a competitive challenge to American manufacturers.  Nevertheless, U.S. companies can maintain a domestic advantage by fully understanding their customers, tailoring products and services to meet their customers’ needs, and implementing more efficient manufacturing practices.