Commentators such as Bruce Rockowitz, chief executive of Li & Fung, a manager of supply chains for major brands and retailers worldwide predicts the end of an era in Chinese manufacturing.
As the average wage rises in China, manufacturers of previously cheap goods are beginning to move their production elsewhere, to places such as Western China, Vietnam, Bangladesh, Malaysia, India and Indonesia. Li & Fung handles roughly 4% of China’s exports to America and a significant proportion of Chinese exports to Europe too. The firm also runs operations in other emerging economies in several East Asian countries, constantly on the lookout for cheap and reliable suppliers of raw materials to use for manufacturing goods at the most economic rate possible.
All this points to China growing at a rate that goes beyond what many spectators have estimated previously. As well as wage increases across the whole of the civilisation-state, demand for commodities on a domestic level is rising as well. This is creating a surge in commodity prices within China.
Mr Rockowitz predicts that prices of Chinese goods for export will rise at the rate of around 5% a year. “There is no next,” he said. As well as his company, other sourcers of Asian toys, basic household goods and clothes are saying similar things about rising prices.
Contrary to this view of Chinese goods rising in cost consistently as the country makes the transition from a developing to a developed country is that of those documenting the annual Computex fair in Taipei. The event took place on the 31st of May; the day after Mr Rockowitz made clear his views on the state of the Chinese economy’s rapid growth. Firms from mainland China turned up in their droves. Even though the world’s biggest and weightiest technology giants like Apple and Microsoft were notably absent, the number of Chinese innovative vendors topped 2,000. There were 500 hired booths – up from 200 in last year’s event. The fair was full to the brim with companies from parts of China previously associated with cheap textiles and toys – but the products on show this time were far more sophisticated.
Technology on show at one of the vendors included a $100 tablet computer running a version of Google’s Android operating system. Also on display were Windows-based wafer-thin computers priced at $250. The quality of these products is most definitely debateable, but the indication is that Chinese manufacturers have a very visible talent for reworking Western technology and making it available for a Chinese consumer base. Another question that must be asked is whether or not the intellectual property embedded in some devices on show is legal. I, for one, remain dubious about this.
Whatever the weather, it’s arguable that Mr Rockowitz may be slightly premature in announcing the end of the ‘Made in China’ era. Manufacturers in China are becoming more and more interested in innovative technology that is able to reduce energy consumption, lower costs or made processes easier to automate. The emphasis in China is now on using less labour but maintaining production. Up skilling is the new focus, it seems.
For commentary from Lord Digby Jones on his new book, ‘Fixing Britain’, go here. He writes about how Britain might be restructured politically, economically and socially for a better future, draws on his experiences as trade minister and director general of the CBI.