On Economics: China as Competition
By Jack Mixner 714 449 1040 www.mixnerstrategy.com
Major investments in Chinese infrastructure by manufacturing companies are starting to decline. Honda, for instance, will complete its new manufacturing facilities on schedule and, when it needs more, move elsewhere. More and more of the Japanese companies are focusing high end manufactring in Japan (Batson, page A4).
What gives? Batson mentions one company that moved manufacturing operations from Taiwan in 1995 cutting costs fifty per cent. Its next move will be to Vietnam, again cutting costs - over China - by thirty-five per cent.
China remains a good place to manufacture things. Infrastructure is strong. The domestic market is huge. Its price advantage over other locations is declining, however.
Strategic Implications
China could move up-scale in its manufacturing content, beginning to compete on the world stage to manufacture higher-end goods. The next ten years will be crucial - and interesting to watch.
Middle market companies which need to manufacture in lower cost production locations will look beyond the Chinese market. High value-added manufacturing may return to local production.
Reference
Batson, Andrew. China Loses Some Allure as World's Factory. Wall Street Journal. 7 August 2006. Page A4.