Happy 2013 to all readers!
Several recent articles look at China’s competitiveness in the global manufacturing economy. Here they are.
What Worker Shortage? The Real Story of China’s Migrants
The “China Real Time” blog, on the WSJ website, points out some little-known statistics:
If you strip out the increases of those with higher experience and skill levels, wages in 2012 rose just 1.7%, compared to 23% in 2011.
Wow! Very interesting for importers. That’s something you should use in your pricing negotiations…
Many economists believe that China has run out of cheap surplus rural laborers. However, in our data we find that only around 25% of the rural hukou labor force has migrated to cities in 2010, and they often stay in cities for a relatively short time–around seven to nine years.
Is this surprising? Not really. There are more and more jobs in the interior. And many of the young Chinese who decide to migrate to the coast end up in restaurants, hotels, and other service industries. Not all of them work in factories!
Source of these data: a survey on the migrant work force conducted by Xin Meng, an economics professor at Australian National University.
Global Sources just published excerpts from the report “The End of Made-in-China?” published by Silk Road Associates. They expose well-known reasons why prices of Made-In-China goods have been rising:
- China’s youth demographic is expected to decline by 44 million over the next 10 years.
- Average wages of unskilled manufacturing workers are around 300 USD in China vs. 54 USD in Bangladesh and 96 USD in Vietnam.
- The renminbi has been slowly appreciating.
- Production is either in coastal areas (higher land price) or in the interior (higher logistics costs)
- High interest rates for SMEs in China.
Nothing earth-shattering, but it is well documented and contains a few nice graphics.
This is the best article I have read so far about the logic behind offshoring production to China vs. “in-sourcing” it back to the US.
The author tells us how a lot of things have changed in the US, where more and more factories are adopting “Lean” methods. In the example he describes, it result in a 35% cut in labor costs.
Unfortunately, until now I have only seen anecdotal evidence of this “insourcing” trend… It is certainly not a “boom” (yet?) as the article’s title suggests.
China Negotiates Like a Little Girl – and it Works
Let’s finish with something a little more fun. Andrew Hupert has found a good metaphor to describe the Chinese government’s negotiating behavior: the 6 year old girl who wants something from her parents.
Right on point, isn’t it?
may be 20 / 40 / 50 years later, Made in China = luxury . The situation same as now Made in Italy, Made in Germany ( also very expensive).
Maybe so. Made in Japan was really “cheap crap” in te 50s and 60s, and now it is synonymous with the lowest defect rate one can find.
Or maybe not. Paul Midler shows us the example of made-in-China silk, a few centuries ago. This phenomenon was at play for Japan but not for China.