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Reports of China’s death as a sourcing destination are still highly exaggerated

The topic of “where is the next” China remains hot.   There are some recent articles in the US press claiming that manufacturing is moving back to USA due to cost issues in China. Those articles even suggest that this is the start of a larger trend.

But it is shear sensationalism, and not based in the reality, to claim that the recent actions of a few players (for example, Apple setting up one production line in the USA) is the start of a larger trend which will witness an exedous of production from China.

The only production that is moving back to the USA is for items that have very little labor with a BOM dominated by raw materials and compenents which are made in the USA.

Those products should have never gone to China in the first place.  And these cases are very few and far between.

Yes, the costs along the Chinese cost are going up.  So the “Next China” is “Interior China”.  Read all about this trend at this post “The Big Picture 2010-2013

Yes, some low end, very labor intensive products (mainly textiles) is moving out of China to SE Asia. But South and SE Asia are certainly not right for companies that need a complex BOM, skilled labor and quality.

The publication “Week In China” has a well-researched article explaining what is really happening.  Here is a highlight:

…pressing priority is figuring out how to reduce costs in China itself. Foxconn, Taiwan’s best-known manufacturer in mainland China, seems to have taken a similar view, opting to move inland to less-developed provinces in search of lower costs for its contract electronics business. And some firms are already back in China after trying their luck overseas. Zhang Yuanheng, a shoemaker from Taiwan, told 21CN Business Herald last month that he knew of a number of Taiwanese manufacturers who had already returned after an unsatisfying stint in other markets, with cultural differences, lower productivity, unconvincing infrastructure and logistics costs largely to blame. So don’t write-off that ‘made in China’ label just yet…


Related reading:

Heavy hitters weigh in on future of China Sourcing


“Week In China” is available exclusively to HSBC’s corporate and institutional clients. But if you visit the blog post “Psst, I got a secret to share” you will learn how CSIC readers can access the publication for free compliments of HSBC

Mike Bellamy is an Advisory Board Member & Featured Blogger at the not-for-profit China Sourcing Information Center. He is also the author of "The Essential Reference Guide to China Sourcing" and founder of PassageMaker Sourcing Solutions.


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