Study finds China losing competitive edge

Posted on 6 Mar 2008 by The Manufacturer

The first China Manufacturing Competitiveness survey, conducted by Booz Allen Hamilton and the American Chamber of Commerce (AmCham) Shanghai, has suggested the nation’s manufacturing attractiveness may be diminishing.

Over half of the surveyed foreign-owned or foreign-invested companies and manufacturing in China considered the country to be losing out to fellow low-cost nations where competitive edge is concerned.

Almost one in five manufacturers surveyed holds firm plans to relocate China operations to other nations.

Reasons for the reduction in competitiveness included wage inflation, staff retention, rising renminbi and low standards of logistics infrastructure, technology and management capabilities.

The survey also noted that companies which made use of China as both a growth market and a low-cost labour/source market, integrating the nation into their global supply chains, achieved much better profits than companies that focused on just one of those objectives.

“The manufacturing philosophy employed by many foreign multinationals in China in recent decades is in need of an overhaul,” said Booz Allen vice president Ronald Haddock. “China’s changing cost and currency structure have shifted, forcing companies to rethink how they structure their Chinese operations and how they perceive China in their overall global strategy. At the same time, China is increasingly a major source of product and business model innovation. We’re seeing globalisation at work and China’s role has changed.”