Did you know that 31 percent of Buyers currently sourcing overseas say that they are researching bringing a portion of their production back to North America? More than 80% of 202 manufacturers surveyed said their primary motive for being in China is to provide products for the Chinese marketplace, up from 71% two years ago.
Having served the world as a manufacturing base for decades, is China still competitive for manufacturers? A number of factors indicate that its competitive lead will be chipped away, not least if the renminbi is allowed to appreciate against the U.S. dollar and costs rise. Some experts predict that low-value-added exporters may be driven elsewhere while manufacturers of high-value-added, complex products for domestic consumption will face even stiffer competition to thrive. Against this backdrop, as a new survey suggests, manufacturers in China are learning quickly about staying competitive in this ever-shifting landscape.
It certainly doesn't help matters much that there's uncertainty and tensions brewing on a number of fronts. Among the foreign IT industry, for example, the ugly exchange between Google and China, and a new rule that stipulates sellers of high-tech goods must contain Chinese intellectual property as part of an "indigenous innovation" campaign, have rattled nerves.
Yet despite all this, experts say there's much that's working in China's favor. Costs are still low and the skills level is high. Meanwhile, the pent-up demand of a potentially huge domestic market combined with improving IT, infrastructure and regulatory regimes all put China well ahead of other low-cost countries.
While the recent announcement of China's first trade deficit since 2004 makes it unlikely that the renminbi will be allowed to appreciate against the U.S. dollar much soon, March's $7.24 billion deficit is also a sign of the fast expansion of China's domestic market. The auto sector, for example, was up 170% in March from the previous month.
China's burgeoning domestic market is indeed a very important allure for many firms, according to the latest China Manufacturing Competitiveness Study published by the American Chamber of Commerce (AmCham) and management consultants at Booz & Company. More than 80% of 202 manufacturers surveyed said their primary motive for being in China is to provide products for the Chinese marketplace, up from 71% two years ago.
While booming local markets are key, there are other reasons for China's appeal, including political stability. A couple of years ago, companies were hedging their bets and adopted a "China plus one" strategy, so that they set up operations in China and in one other nearby country. Many chose Thailand as the second country and the current strife is bad news for businesses there.
The stable currency has also been helpful, adding an element of predictability to budgeting and keeping costs down. Two years ago, the AmCham study found that the rising RMB was the most serious worry for the companies surveyed, but since then government policy has calmed those fears. The AmCham study also notes that "although factories in China are generally still in the early stages of implementing innovative manufacturing practices, these lean techniques and processes are even less prevalent in surrounding low-cost countries."
Lian Hoon Lim, partner and manufacturing expert at AT Kearney consultants, says companies are benefitting from what he calls "the cluster effect," The big three clusters in China are the Yangtze River Delta region around Shanghai, the Pearl River Delta region running from Hong Kong to Guangzhou, and the region around Beijing and its neighbor Tianjin. In these areas companies have access to a "skilled labor, an experienced local managerial workforce, material and component supply, and good infrastructure," says Lim. "If you took those four factors and looked at the countries in Asia, including in the subcontinent, you would find that quite a lot of them lack one or more of these four points."
SOURCE:http://www.articlesbase.com/small-business-articles/is-china-still-competitive-for-global-manufacturers-2833132.html
Having served the world as a manufacturing base for decades, is China still competitive for manufacturers? A number of factors indicate that its competitive lead will be chipped away, not least if the renminbi is allowed to appreciate against the U.S. dollar and costs rise. Some experts predict that low-value-added exporters may be driven elsewhere while manufacturers of high-value-added, complex products for domestic consumption will face even stiffer competition to thrive. Against this backdrop, as a new survey suggests, manufacturers in China are learning quickly about staying competitive in this ever-shifting landscape.
It certainly doesn't help matters much that there's uncertainty and tensions brewing on a number of fronts. Among the foreign IT industry, for example, the ugly exchange between Google and China, and a new rule that stipulates sellers of high-tech goods must contain Chinese intellectual property as part of an "indigenous innovation" campaign, have rattled nerves.
Yet despite all this, experts say there's much that's working in China's favor. Costs are still low and the skills level is high. Meanwhile, the pent-up demand of a potentially huge domestic market combined with improving IT, infrastructure and regulatory regimes all put China well ahead of other low-cost countries.
While the recent announcement of China's first trade deficit since 2004 makes it unlikely that the renminbi will be allowed to appreciate against the U.S. dollar much soon, March's $7.24 billion deficit is also a sign of the fast expansion of China's domestic market. The auto sector, for example, was up 170% in March from the previous month.
China's burgeoning domestic market is indeed a very important allure for many firms, according to the latest China Manufacturing Competitiveness Study published by the American Chamber of Commerce (AmCham) and management consultants at Booz & Company. More than 80% of 202 manufacturers surveyed said their primary motive for being in China is to provide products for the Chinese marketplace, up from 71% two years ago.
While booming local markets are key, there are other reasons for China's appeal, including political stability. A couple of years ago, companies were hedging their bets and adopted a "China plus one" strategy, so that they set up operations in China and in one other nearby country. Many chose Thailand as the second country and the current strife is bad news for businesses there.
The stable currency has also been helpful, adding an element of predictability to budgeting and keeping costs down. Two years ago, the AmCham study found that the rising RMB was the most serious worry for the companies surveyed, but since then government policy has calmed those fears. The AmCham study also notes that "although factories in China are generally still in the early stages of implementing innovative manufacturing practices, these lean techniques and processes are even less prevalent in surrounding low-cost countries."
Lian Hoon Lim, partner and manufacturing expert at AT Kearney consultants, says companies are benefitting from what he calls "the cluster effect," The big three clusters in China are the Yangtze River Delta region around Shanghai, the Pearl River Delta region running from Hong Kong to Guangzhou, and the region around Beijing and its neighbor Tianjin. In these areas companies have access to a "skilled labor, an experienced local managerial workforce, material and component supply, and good infrastructure," says Lim. "If you took those four factors and looked at the countries in Asia, including in the subcontinent, you would find that quite a lot of them lack one or more of these four points."
SOURCE:http://www.articlesbase.com/small-business-articles/is-china-still-competitive-for-global-manufacturers-2833132.html
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