As China has become a manufacturing goliath, it has appeared unstoppable in the eyes of many. In fact, manufacturing in China faces many challenges. Albeit many of these problems come from its success in becoming a producer of so many goods, they are, nonetheless, transforming manufacturing in China with effects that will be felt throughout the world.

Labor supply and costs

While Chinese workers still earn a lot less on average than their Western counterparts, average wages have been increasing at respectable rates annually in recent years. Factories competing for workers as well as increased labor unrest have pushed up wages. Now average wages in China are often significantly higher than other low-cost nations such as Vietnam.

The labor force is not as bottomless as many imagine and is sometimes in the wrong areas. A booming economy has increased the need for all kinds of workers and family planning policies have begun to reduce supply. Also, while there are excess workers in many areas of China, fast-growing coastal areas such as the provinces near Hong Kong, where much of the manufacturing is, often have serious labor shortages.

Competition

Other developing nations have seen, and not surprising, tried to copy China’s success. Many competitors, particularly in Asia, have started economic zones with special incentives to attract outside manufacturers and investors. Also, trade deals such as NAFTA have given nations like Mexico an advantage at China’s expense in the US market-particularly at times of high energy and shipping costs. This, and wages that are now often lower than China’s, has begun a shift of some manufacturing away to other nations.

Outside pressure

Due to pressure from other nations over massive trade surpluses, China has eliminated tax breaks for exporters and allowed it currency to rise. This increases the cost of Chinese exports.

In response

To meet these challenges, China has been taking steps to encourage more investment in the interior provinces where labor is more plentiful and costs are generally lower. It has also invested heavily in infrastructure to make doing business in and exporting from China easier.

Advantages

China still has many advantages that will keep it a manufacturing powerhouse for the foreseeable future. After decades of doing business, many Chinese have gained a lot of experience in and knowledge of Western markets as well as engineering skills. Also, there still is a massive labor force that is generally hard working and still cheaper than many other countries.

Furthermore, a large network of suppliers has developed to make manufacturing there a lot easier. China now has the experience, infrastructure and know-how to manufacture more high-value goods.

Therefore, although manufacturing in China is changing, there is every reason to expect that nation will remain a center of manufacturing for a long time to come. More manufacturing will shift to new areas as well as to more value added and less labor intensive goods. However, there are still enough advantages to keep it a competitive place to manufacture goods.

Author Bio: Find out more about Manufacturing Sourcing in China and other nations. Great information on manufacturing outsourcing for those considering sourcing over

Category: Business
Keywords: manufacturing, sourcing,China, China sourcing, factories,product manufacturing