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  1. #1 The beginning of the end for cheap Chinese goods? 
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  2. #2  
    Life Is Good! ChinaV's Avatar
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    May 2008
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    Thanks for the link forchetto, an interesting point of view, but I think China will continue its role as the worlds factory for a very long time.

    #1 There's still plenty of cheep labor, land, and hungry local governments further inland. Labor and tax laws have little effect on the bottom line when you have a local government willing to give free land, a free building and less than perfect oversight of your labor and tax procedures.

    #2 Far too often, these articles fail to take into account the consolidation happening in the manufacturing sector. Big conglomerates have been started in China with the sole purpose of dominating certain areas of manufacturing. There's a lot of cash floating around, and they're spending it on technology and infrastructure.

    #3 These huge conglomerates will raise efficiency and productivity levels. The typical China factory runs way over staffed with very little automation. As the manufacturing sector matures, factories will learn to run lean and mean. Given their ability to cut corners, the Chinese will probably be running with much less overhead than their western competitors.

    #4 Laibillity - Imagine how cheap it would be to make something in America, Germany or the UK if there were no lawyers or insurance companies. I'm not advocating irresponsible business practices, just saying that it's going to take at least another 15 years before the "cost of accountability" starts to hit the bottom line of Chinese companies.

    #5 Energy - Although the cost has gone up, electricity and oil are subsidized by the government in China, the cost is still lower than in the west.

    #6 Cambodia, Vietnam etc. - Fine if you want to make textiles or furniture, but you need a vast support network to be a manufacturing powerhouse. If you want to make goods like electronics or automotive parts, it takes components. Countries like Cambo and Nam just don't have the second tier supply networks for global manufacturing.

    Maybe the "everything is cheap in China" days are coming to a close, but the China price advantage is going to be around for quite some time.

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