China is
the world’s largest manufacturer in the world. It has been at the top of the
list since 2010, when it surpassed the United States. Currently, China accounts
for 20 percent of all global manufacturing. Previously, labor was very cheap,
which is one of the main reasons why so many companies went to China. Now,
however, labor costs are rising and the era of cheap China may be coming to an
end. Already this year, labor costs have risen 10 percent. Some major
manufacturing companies such as Foxconn, a company that makes the iPad,
increased salaries 16-25 percent last month. This is creating an interesting
dilemma for companies in China. Some are considering moving to other countries
where labor is on average 30 percent cheaper. Others are attempting to more
fully automate the manufacturing process. Yet others are fine staying in China
because productivity is higher than before, which they feel justifies a higher
wage. The Chinese market is also incontestably the largest in the world.
Finally, China’s supply chain is “sophisticated and supple.”
I felt
that this article is interesting because it describes in detail the dilemma that
the newer and higher labor costs are creating for manufacturing in China. For
years China has been on the rise at a record pace, but perhaps now other
countries in the area will get a little more attention and begin to grow as
well.
Josh Thompson
10 March 2012
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