Is it time to leave China? 8/23/2010

A great article in the Wall Street Journal this morning titled “Southeast Asia Tries to Link Up to Compete”.  Like many others, the authors discuss the impact of rising wages in China.  What I found most interesting though, is that these authors brought up a good point that I have been sharing with our customers for months – the point that, despite these wage increases, China is still the best option for many companies sourcing goods from low cost regions.  I have chatted with tens of companies over the last few months about Vietnam, India, etc.  While these geographies do have very competitive labor rates, often significantly cheaper than China’s, they lack the infrastructure, skilled workforces, and production experience required to support robust supply chains.

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  1. Karen Gulliver

    It took China 20 years to get to the point where they are starting to understand mass manufacturing and have the labor force necessary to support it. But business negatives, such as wage demands, shrinking margins, etc, are just beginning in the Red Dragon. It behooves a firm to start looking, because a move to another Asian country could take 2-5 years.

    Having just returned from Vietnam, I can tell you that they are highly aware of their deficiencies and are determined to seize on this opportunity to woo FDI away from China. The China +1 philosophy is very strong among the firms currently operating in Vietnam. The deficiencies you cite there are 100% accurate, but fixable. Vietnam, which runs a trade deficit and a budget deficit badly needs FDI. So, from a negotiating standpoint, there has never been a better time for a western firm to drive a hard bargain there.

    Nov 11, 2010 @ 1:42 pm

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