Cheap “Made in China” Era Waning?
Posted 07-09-2010 at 12:32 PM by Albert Fong
As countries evolve economically, competitive advantages change which may be what is now happening to China’s manufacturing industry. Earlier this month, I wrote about how the rising number of worker stoppages at China-based factories and how this was a potential sign of things to come for U.S. companies. It’s becoming more obvious that the cheap “Made in China” era may soon be coming to an end.
For more than two decades, China (along with Japan) had the monopoly on cheap manufacturing due to a large labor force and low wages. I remember during the 1980s when the mass migration of manufacturing overseas from the U.S. took place to fuel the growing demand of goods. At the time, the highly educated U.S. consumer had the money and resources to buy, while China was more than happy to meet our needs at a cheap price. It changed the economic fortunes both here and abroad with lasting effects that continue to impact us today.
Evolution, progress, advancement…whatever you call it, China on the backs of low-cost, high production factories has grown up to be an economic powerhouse. Along with that, you have a labor force that is as highly educated, if not more driven by material wealth, than we are here. Ironically, it’s likely to come at the expense of the manufacturing sector.
While still inexpensive compared to American wages, the cost advantage that China offered is shrinking. American companies are finding the advantages of outsourcing production to China offer few financial benefits. In fact, labor disputes, a restrictive business environment and a floating yuan all make China less appealing. To elaborate on the labor disputes a bit, the typical Chinese factory worker is much more educated and ambitious (you can see that in the red hot demand for housing over there). Those attributes make factory workers less willing to accept low wages and substandard work conditions. Why would they when they have plenty of options and better opportunities? This changing demographic is nothing new when you look at the history of the U.S. economy and its development since the Industrial Revolution.
For U.S. companies, the time is near to take stock of the long-term production strategy. Outsourcing remains a viable option, but as Honda, Toyota and Apple can attest, “Made in China” may not have the big financial allure it once had over “Made in USA”.
For more than two decades, China (along with Japan) had the monopoly on cheap manufacturing due to a large labor force and low wages. I remember during the 1980s when the mass migration of manufacturing overseas from the U.S. took place to fuel the growing demand of goods. At the time, the highly educated U.S. consumer had the money and resources to buy, while China was more than happy to meet our needs at a cheap price. It changed the economic fortunes both here and abroad with lasting effects that continue to impact us today.
Evolution, progress, advancement…whatever you call it, China on the backs of low-cost, high production factories has grown up to be an economic powerhouse. Along with that, you have a labor force that is as highly educated, if not more driven by material wealth, than we are here. Ironically, it’s likely to come at the expense of the manufacturing sector.
While still inexpensive compared to American wages, the cost advantage that China offered is shrinking. American companies are finding the advantages of outsourcing production to China offer few financial benefits. In fact, labor disputes, a restrictive business environment and a floating yuan all make China less appealing. To elaborate on the labor disputes a bit, the typical Chinese factory worker is much more educated and ambitious (you can see that in the red hot demand for housing over there). Those attributes make factory workers less willing to accept low wages and substandard work conditions. Why would they when they have plenty of options and better opportunities? This changing demographic is nothing new when you look at the history of the U.S. economy and its development since the Industrial Revolution.
For U.S. companies, the time is near to take stock of the long-term production strategy. Outsourcing remains a viable option, but as Honda, Toyota and Apple can attest, “Made in China” may not have the big financial allure it once had over “Made in USA”.
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