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Recent Decrease in China’s Manufacturing Activity

Last month there was a net decrease in China’s manufacturing sectors due to slowed exports, which may signal a cooling economy. Looming trade issues also exist between the U.S. and China, putting the industrial sector at risk. One strongly-regarded indicator, the Purchasing Managers’ Index (PMI) reflected a relatively shallow drop from 51.5 to 51.4. There are some concerns that this decline will continue, especially as trade tensions rise between China and the U.S. Besides escalating trade tensions and debt risks, the easing of environmental controls that contributed to China becoming a growing economy has run its course. [1]

China’s Possible Trade War with the U.S.

How these latest tensions between the U.S. and China will affect s growth is yet to be seen, but it’s expected that the impact could be in the billions of dollars. Export orders already fell from 51.3 to 50.7, which is a more significant drop than the PMI. It’s possible that China may shift its policy due to the prospect of a trade war with the U.S. If this trade war occurs, then tech firms and many others are going to be seriously impacted.

Right now, Beijing is being very assertive in its refusal to talk about the top two U.S. trade demands. This could derail the talks that Americans are traveling to have with the Chinese government. Two primary demands by the current U.S. administration are a $100 billion cut in the $375 billion trade deficit the U.S. racks up with China each year and to curb the $300 billion plan by China to bankroll upgrades to technologies like electric cars, artificial intelligence, and electric commercial aircraft. Beijing has resisted these key proposals. [2]

While both governments share hope a mutually acceptable trade deal will eventually be hammered out, there’s little common optimism that this agreement will come within the timeframe of the upcoming summit. Extended negotiations will likely be necessary for China’s long-term goals of expanding exports from its automotive and financial sectors, as well as tighten the reins on innovative technologies.

Switch to Manufacturing in India

While a climate of uncertainty swirls around U.S.-China trade relations, India remains a proactive global manufacturing hub, with favorable advantages in design, manufacturing, exports, and intellectual property protection for global OEMs. Combined with India’s relative political and economic stability, the added incentives created by Goods and Services Tax and the Make in India program are expected to spur a dramatic uptick in the nation’s share of the global electronics manufacturing market.

Goods and Services Tax (GST): A recent overhaul of India’s commercial tax system is poised to make it an even more attractive source for electronics manufacturing and exports. In 2017, India’s new nationwide Goods and Services Tax (GST) was launched. It represents a uniform, transparent tax code for all Indian businesses, replacing a convoluted regional tax structure, where 29 states independently levied their own complicated schedules of surcharges, excise tariffs, and other taxes. GST mitigates the economic burden of multiple cascading local taxes compounded on a single product.

Make in India Program: This initiative was established in 2014 to enhance the country’s reputation as a world-class manufacturing center. In 2016, the government announced ambitious new incentives and policies aimed at promoting investment, fostering innovation, and protecting intellectual property, all directed toward sustaining a highly efficient, world-class manufacturing infrastructure. This included new delicensing and deregulation measures to eliminate red tape and other bureaucratic roadblocks to increase speed and transparency for foreign-based companies looking to invest. The government also announced state-sponsored grants and rebates for small-to-medium enterprises (SMEs), while rewarding facilities that meet the country’s strong green technology standards.

We’re excited about the continued support the Government of India has devoted toward establishing our home country as a global hub of electronics manufacturing. We contribute our four decades of design and manufacturing expertise spanning multiple diverse markets, and we look forward to discussing how we can deliver world-class products for OEMs across the globe.

Backed by 40 Years of Expertise

We contribute our 40 years of design and manufacturing expertise spanning multiple diverse markets, and we look forward to discussing how we can deliver world-class products for OEMs across the globe. We understand our home India market, familiar with its vast regulatory and selling environments. We foster growth opportunities within India through our strong technology incubation ecosystem. We also assist global OEMs seeking to enter the India market by leveraging the local supply chain and favorable operating environments for cost reductions.

Our flagship Chennai location opened in 2006 and lies within a Special Economic Zone (SEZ) for electronics manufacturing, offering economic incentives for imports and exports. This primary facility is within 90 minutes of the Chennai seaport and 20 minutes to the international airport, with additional road and rail, connectivity linking to the rest of India and beyond, as well as infrastructure advantages with faster import and export clearances. We also have labor force availability, both technical and manual, to rapidly scale to client demand.

To learn more about this topic, please contact us.

Syrma TechnologyRecent Decrease in China’s Manufacturing Activity

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