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Is the Chinese Economy Faltering?

Chinese industrial output has sunk to its lowest rate for more than a decade, according to official data.

Chinese official data is notoriously unreliable, but it is likely to represent an optimistic interpretation of the figures. Amidst an ongoing trade war with the US, and mounting signs of a global downturn, some slowdown in Chinese manufacturing and in industrial output had been expected.

Slowing Growth

The statistics come straight from China’s National Bureau of Statistics, which looked at industrial output across the Chinese economy. Industrial output is used to give an overarching view of manufacturing output. It is not a perfect measure and does not distinguish between manufacturing output in different sectors. However, it is a reliable predictor of certain economic conditions.

The Chinese retailing sector didn’t fare much better and also experienced sluggish growth at a rate not seen since April. But, more concerningly, the growth figure of 7.6% is below the 8.6% that economists had been predicting.

This news will disappoint many investors. The Chinese economy had held up well during the first half of 2019, weathering the ongoing trade spat with Donald Trump. However, these new figures are part of a wider trend – the Chinese economy as a whole is growing at its slowest rate in 30 years. Chinese exporters, like their American counterparts, are paying for the ongoing trade dispute between their governments.

Is China Still a Good Manufacturing Base?

Many businesses may be wondering if a slowdown in the Chinese manufacturing sector might impact their plans. A lot of US-based businesses use Chinese prototype manufacturers, as well as using Chinese manufacturers for low volume manufacturing and other rapid prototyping services.

The current signs of weakness in the Chinese economy shouldn’t deter US businesses from investing in prototyping services or general manufacturing services in China. Whether you are looking for a manufacturing partner to create prototype models for you, or someone to manufacture the final product at volume, China still represents a solid and reliable manufacturing base.

Businesses like RapidDirect make it easy for US businesses to take advantage of the many benefits that Chinese manufacturers have. RapidDirect offer CNC machining, injection molding, and sheet metal fabrication, as well as polymer and metal 3D printing.

What Are The Benefits of Chinese Manufacturing?

The most significant difference between manufacturing in the US and China is that the costs are lower. Chinese labor is cheaper, and by outsourcing your manufacturing to China, you are able to take advantage of this cheaper labor. Outsourcing your work also means that you won’t be responsible for training the workers in the factory, nor for ensuring their working conditions. Of course, if you are caught using workers who aren’t treated well, your business will pay for it in PR. You should always stick to reputable businesses.

Because of China’s importance to global manufacturing needs, the country has massively scaled up its capabilities, enabling it to harness the power of its huge population. This means that the production capabilities of Chinese factories exceed those of their US counterparts.

The result of all of this for your business is a significantly lower cost of manufacturing for each unit. Even if you are only looking for low volume manufacturing and prototyping services, Chinese manufacturing can provide you with more for less.

But an often-overlooked advantage of manufacturing in China is the opportunities it presents for expansion and diversification. A cut in manufacturing output like the one we’ve seen could yet yield some benefits to businesses looking to invest. There will be more manufacturers looking to make deals and potentially some very competitive offers for available contracts.

Many manufacturers will be able to handle multiple types of manufacturing for you without any issues. If they can’t, there will be another manufacturer available nearby who will be able to help you.

While the Chinese economy is currently growing at its slowest rate in some time, it is still undeniably growing. The only question is whether the Chinese government is massaging the figures and to what extent. It is often prudent to wait for independent market analyses, which use various methods to calculate a figure for actual Chinese manufacturing output.

Whether the Chinese economy is slowing or not, it is still providing vital services to the world economy. China has established itself as the center of global manufacturing for a reason – namely that it is able to provide an exceptional ROI for any business that takes advantage. If you are looking to cut your lead times and to reduce the cost of your per-unit spending, China is the obvious choice for your manufacturing base. Make sure that you choose a reputable manufacturer to work with, not only for ethical reasons but also to ensure that you are getting the best quality possible. This is a competitive market where you can afford to demand the best.

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