Continued economic growth will make this the Chinese Century

In the business world, it is the manufacturing sectors in developed economies that are decidedly nervous; and for good reason. Local and (particularly) foreign owned manufacturers are installing world best practice equipment and technologies in China to produce goods at both the mass-market and up-market levels for domestic consumption and exports. The economies of scale in China are unlike anything the world has ever seen.

In Australia, our manufacturing sector had already shrunk in relative terms from 29 per cent of GDP in 1960 to 10.6 per cent in 2003. This was mainly due to increased productivity, and secondly due to competing imports. The addition of China more recently as a competitor will see this downward trend continue. Our once giant agricultural industry, at 25 per cent of GDP in 1901, is now just three percent; so there is a precedent. That decline did not stop Australia improving its GDP 36-fold in the 20th Century and its standard of living by a factor of seven times. Nor will the continuing relative decline of manufacturing in the 21st Century adversely affect our growth in the 21st Century.

There are many industries – including export-oriented new industries such as tourism, energy, mining, information, education and others - that will more than fill the void left by manufacturing.

However, China’s rise, alongside the continued economic power of the USA, will create two giant anchor nations in the Asia Pacific region; Australia’s home region. This will enable a niche economy such as Australia’s to do extremely well in the 21st Century, provided we don’t tilt at windmills and pretend that we can compete across the board in all industries against the giants.