Friday, August 20, 2010

Is China still the place to be in?

A report by Credit Suisse said the vast majority of U.S. and European companies in China are expecting a "margin hit" over the next 12 months and fear they will not be able to pass on the costs to consumers, with the biggest worries in electronics, clothing and retail. Why?

Rising wage and production costs in China are eating into the profits of Western companies and may soon set off an exodus of multinational companies to cheaper locations.

In May General Electric, said it had plans to shift production of its hybrid water heater from China back to Kentucky next year after securing lower wages from U.S. workers. The company cited the narrowing pay gap, lower transport costs and shorter delivery times.
Pay in the industrial hubs of the Pearl River and Yangtze River deltas are much higher and likely to rise further after a wave of industrial disputes at Foxconn, Honda, Toyota and Omron.

Does/ it mean that manufacturing will return to North America? Maybe

Credit Suisse's survey of executives found that 55% of foreign firms in China could relocate plants to Bangladesh, Vietnam, Indonesia or other low-cost regions relatively easily, though it would be costly.

I guess only time will tell. If we can last long enough.

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