Industry in transit to China

Source: The Sunday Times

The deal in which China’s Nanjing Auto mobile Corporation acquired MG Rover’s factory at Longbridge highlights two major changes. One is that less that 2000 workers will be involved at Longbridge and most of the screwing together will be done in China. The other being that it represents the slow changeover in manufacturing from Britain to China.

What is happening to Rover is representative of what is occurring to the British manufacturing industry. Under competition from China, manufacturing industries are withering away.

The contribution of manufacturing to output has dropped from 20.1% in 1998 to 14.9% for 2003. Britain is seeing a change, as tertiary industries flourish increasing its share of Britain’s annual output from 24%in 1992 to 27.6%.

This is no surprise as one of the iron laws is that as prosperity and economic growth increase, the primary sector is the first to decline. The same happens with the secondary sector, manufacturing.

Manufacturing has been hard hit by the rise of China, the strength of the pound against the euro and uncertain world markets. But does it really matter? In theory, yes but in practice, certainly no.