The China manufacturing advantage has been the secret sauce for millions of businesses around the world. Some say there is no way this can continue.
Manufacturers in China are responsible for making everything from simple toys to the most sophisticated electronic manufacturing projects. The reason China was able to get the contract for all these manufacturing projects is their ability to undercut any other country in terms of price.
Obviously, if a company can get cheap, but good quality manufacturing they will go with that manufacturer.
The problem with this scenario is that the average wage of workers in manufacturing plants in China is lower than almost any other country. Chinese workers are in a deep state of poverty. On the other hand, in the last ten years their wages have tripled.
Despite that, the average Chinese manufacturing plant worker is far below the average in some of the most poverty stricken countries in the world. It is significantly lower than even in countries like Korea, Thailand and Malaysia.
The Chinese government realizes this problem. They are implementing solutions like making it mandatory for manufacturing plant workers in China to be unionized when working for companies in wealthy countries.
This makes it more complicated for Western companies to use manufacturers in China. Costs increase for them in their head offices, in the West and problems increase in the manufacturing plants in China.
If companies can get their manufacturing done in other countries without all the hassles, they will certainly take that route.
China realizes they can’t rely on marketing on the basis of dirt cheap labour. Does this mean they are soon going to be less competitive?
No. Not yet.
Strategy To Keep The China Manufacturing Advantage
First of all, wages for Chinese manufacturers are only going up in the cities. Just a few miles out of the city is a vast network of villages with qualified people hungry for jobs.
Second, China already produces more STEM graduates (science, technology, engineering and mathematics) than any other country. The productivity of the average Chinese manufacturing worker is improving very quickly.
Third, the International Federation of Robotics predicts China will be home to 40 per cent of the world’s industrial robots by 2019. Again, China’s ability to produce more and better quality products is improving faster than any other country in the world.
President Hu Jintao has made closing the wealth gap a major plank of policy over the next five years. China has embarked on an unprecedented journey to lift a significant proportion of the world’s poor into what we call the developed world.
With China’s overall industrial development strategy, the China manufacturing advantage will stay. Manufacturing in China will remain competitive in the global market. China will continue to dominate the world in manufacturing in the foreseeable future. They will do it in a way that is good for Chinese workers and still remain a viable alternative for companies looking for cost efficiency and top quality manufacturing.
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