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March 18, 2008|
The "China effect" may soon give way to the "Vietnam
effect" or "India
effect." The country is losing its competitive edge in
manufacturing to other low-cost nations in the region,
according to a survey of foreign-owned or foreign-invested
companies manufacturing products in China. The study, entitled
"China Manufacturing Competitiveness 2007-2008," was
undertaken by management consulting firm Booz Allen Hamilton
and the American Chamber of Commerce in Shanghai. The study
found that nearly one in five manufacturers surveyed has
concrete plans to relocate or expand China operations to
other countries, with Vietnam and India seen as the top
alternatives.
The major reasons cited for China's declining
competitiveness included the rising value of the currency
and wage inflation. Other reasons included difficulties
retaining staff, and that the country lags behind global
standards in areas such as logistics infrastructure, trade
environment, access to technology, management capabilities
and protection of intellectual property. The study also
found that companies that pursue China as both a growth
market and a market for lower-cost labour and sources,
and integrate these operationally, enjoy significantly
higher profits than companies pursuing just one of these
objectives.
www.amcham-shanghai.org
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