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Therefore, for the first decades of the 21st century, the PRC has for all practical purposes an unlimited supply of labor, at least of the unskilled and minimally educated variety, and perhaps also of basically literate and numerate hard-working laborers who were born in the countryside.

A global perspective

Table 5 gives BLS compilations of levels and trends of manufacturing employment in the Group of Seven (G7) developed countries; in 2002, these countries had a total of 53 million manufacturing workers. China’s official data showed 83 million manufacturing employees that year, but, as mentioned earlier, that figure was likely an understatement, and the true number was probably closer to 109 million. (See table 4.) Most of the countries listed in table 5 have had declining numbers of manufacturing workers, as did China in the late 1990s, because of both rising productivity and increasing global competition in manufacturing. 88

In addition, the share of manufacturing in total employment has been declining in most of the G7 countries.89 In 1990, manufacturing employment ranged from 15 percent to 32 percent of total employment in these developed countries, but by 2002, the share was down to 12 percent to 24 percent of total employment. In China, meanwhile, official data showed that manufacturing constituted only 14 percent of total employment in 1990, after which it declined to 12 percent in 2002. The difference between China and the developed countries, of course, is that agriculture still employs a large proportion of the working population in China. Chart 3 shows that, even though manufacturing employs a similar proportion of workers in the United States and China, most other workers in the United States are in services, whereas in China the service sector is comparatively underdeveloped and agriculture continues to employ more workers than services.

Why does China have so many more manufacturing workers than other countries? First, much of China’s manufacturing production is still labor intensive rather than capital intensive, so more workers are required in China to produce the same output. Second, China is extremely competitive in the global market for manufactured products and is able to sell its manufactures around the world, not only because it pays low wages, but for many other good reasons as well. Third, the manufacturing sector in China serves the country’s own huge domestic market as well as the international market.

Summary and conclusions

This report has collected and assessed the available statistics on manufacturing employment in China. Official data from the China National Bureau of Statistics and the Labor Ministry show a steep drop in urban manufacturing employment in China from 1995 to 2001 and in total manufacturing employment from 1995 to 2000, after which the numbers stabilized or began to rise. The declines in Chinese manufacturing employment in the late 1990s were caused by (1) massive layoffs and early retirements of redundant workers in China’s urban state-owned and urban collective-owned manufacturing enterprises, (2) a change in coverage starting in 1998 that has included only on-post (not laid-off) manufacturing workers in the urban employment numbers from 1998 to the


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