An item in the Financial Post by David Barboza caught my eye today. China's "industrial miracle" is learning quickly to reshape itself as cheap labour dwindles. The predicted future strengthening of the yuan, and wage inflation facing manufacturers in the large industrial zones have them looking to go "to the next stage of development" by upgrading facilities and service. Some factories are moving inland where wages are 30% cheaper. Some are going offshore to other countries like Bangladesh and Vietnam where labour remains cheap. A Chinese scholar hopes "that China's comparative advantage as a low-wage producer does disappear - the sooner the better". It is realized that some factory investments can't easily be moved and new tactics are required to add value.
Predictably Chinese manufacturers are learning to serve their customers better to overcome some of the drawbacks of being far away. TAL Group is now managing the supply chain for its products at JC Penney, one of its biggest T shirt buyers. "We know what's in the warehouse, what's on the boat. We help reduce inventory". This sophisticated partnering approach is in stark contrast to the business environment during the first big expansion last decade. From now on look for happier customers partnering with their Chinese suppliers.
The Leaning-out of the supply chain and manufacturing facilities in North America has never been more urgently needed.
This is the natural way as countries leave the third and second world and enter the first worlds. We Americans and Canadians don't do much actual manufacturing anymore. We left the hard work to the Chinese and now that they have succeeded at it their wage structure no longer allows them to compete so they have moved higher up the food chain. Pretty soon nobody will actually do anything. The financial sector has succeeded at that for decades.
ReplyDeleteTo be honest I've had some excellent success with Chinese manufacturers but i have a secret weapon, a liason. who can oversee everything for me , sort of a broker. Its Temco Controls. I highly recommend the use of a broker like Maurice Duteau's staff at Temco. Without him we'd have a tough time creating the wonderful solar pool heating products you see at Hot Sun Solar Pool Heating.
Well said Ken. Agreed it is the natural order of things in the long run to shed high labour jobs to low labour jurisdictions. I remain concerned that much of our economy is like low-hanging fruit for aggressive nations. If you are not moving forward you are falling behind!Shame on us for not making it more difficult to take away our hard-earned industries.
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