Minnesota Manufacturers Facing Stiff Chinese Competition, MTI Survey Says
Minnesota manufacturers are cutting payrolls, bidding low and scrambling to compete with the giant threat of cheap labor and enhanced manufacturing facilities offered in China, according to a recent survey of Greater Minnesota manufacturing companies.
Funded by Minnesota Technology, Inc. (MTI), the state's lead technology-based economic development organization, the survey finds that most of Minnesota's outstate manufacturing companies are facing increased competition, specifically from Chinese manufacturers. Half of all respondents said that Chinese competition is hurting their business, and others suggested manufacturers have yet to see the benefits of trade with China touted by many free marketers. Of those who said Chinese manufacturing had hurt their business:
- When asked to estimate the loss in sales attributable to Chinese manufacturing, respondents on average estimated they would lose about 20 percent of their business in 2003, with larger losses expected over the next several years. Sixty percent said that it had resulted in lost business as customers bought from or moved production to China.
- Thirty-six percent favored tax breaks to manufacturers or the imposition of a more favorable tariff structure to address competition. When asked to explain why firms operating in China could compete so effectively, manufacturers most often pointed to cheaper labor and the lack of supplemental costs for doing business in China, such as health insurance. And,
- Although China was the most frequently named competitor; manufacturers also indicated increasing competition from Mexico, Taiwan and Canada.
To conduct the survey, MTI compiled a list of 850 manufacturing firms in sectors that U.S. Trade Deficit Review Commission researchers identified as having significant production shifts from the U.S. to China. One hundred fifty of these firms were randomly selected and surveyed by telephone between January 6 and January 16, 2003.
The MTI survey Impact of China-based Manufacturing on Greater Minnesota Manufacturing Companies is available at: http://www.minnesotatechnology.org/
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