Thursday, September 16, 2010

What Are the Supply Chain Implications for a High Cost China?

(Transport Intelligence – John Manners-Bell)

One dominant theme emerging from the World Economic Forum event in Tianjin is the anticipated rise of Chinese manufacturing costs and its implication for supply chains.

The last twenty years have seen China develop into the world’s foremost manufacturing location. Multinationals have developed global supply chains to supply the world’s rich consumer markets in the West, with production underpinned by low cost labour strategies.

However these strategies are likely to become increasingly unsustainable as costs in China rise, compounded by uncertainty over the prospects of the renminbi. Policy makers in China have consequently seen the necessity to re-focus its economic development policy around technological innovation which will see labour costs become less important.

This is obviously a pragmatic response by the Chinese government and follows the well trodden path of many other formerly developing nations. It is also part of China’s new assertiveness on the world stage as it moves from component supplier to Original Equipment Manufacturer in its own right... Read more here.