Made In China Is Still A Good Choice.

As we all know, some American companies are shifting their production from China to other countries.

For example, last year, Coach announced that in order to cope with the rising labor costs, it will pfer 50% of its manufacturing business in China to other low-cost countries.

It is reported that Adidas is also preparing to close their factories directly under Suzhou.

Based on these practical cases, we often hear some comments on the higher labor costs in China from some executives of multinational enterprises.

But they may not understand that China has a vast territory, and there are great differences in culture, dialect and economy between provinces and autonomous regions.

Wages in coastal areas and big cities, such as Shanghai, are at a relatively high level, but there are still many areas where wages are still at a low level, especially in the inland areas.

This is very advantageous to enterprises that do not need to manufacture in coastal areas at all. For example, the products of the company are supplied to other manufacturers or consumers in China, or to the export markets that can be reached through surface pportation (such as central Europe, Eastern Europe, Thailand, Vietnam, etc.).

For example, a garment manufacturer aiming at domestic consumers and international brand OEM recently decided to move its factory from Guangdong to Sichuan. The relocation is expected to reduce labor costs by about 40%.

At the same time, inland revenue preferential policies and constantly upgrading infrastructure are attracting many multinational companies.

At present, 40% of the Fortune 500 companies have settled in Chengdu and Chongqing in the southwest.

At the same time, Wuhan, the capital of Hubei Province in Central China, has attracted many enterprises to set up production bases with the help of local low wage level and high education level labor force. It has launched effective competition with traditional production base cities, such as Shenzhen (see Table 1).

Wuhan has attracted apple, DELL and many other innovative enterprises to set up factories.

Meanwhile, Pfizer Inc, a well-known multinational pharmaceutical company, has recruited a large number of university graduates from the region to join its R & D center in Wuhan, which is responsible for supporting Pfizer's clinical drug research projects in different regions of the world.

Labor wages are only a consideration in the evaluation of plant location.

Other important considerations include design and production capacity, and the ability to control the entire supplier network (supporting supply capability of raw materials and components, effective integration among different suppliers, planning and forecasting capabilities, etc.).

In order to identify China as a whole as a production base compared with other countries.

L.E.K. consulted an analysis of the economic situation of low cost countries and the direct production costs of different regions and products.

In terms of total manufacturing cost, China is far lower than developed countries, for example

It is at an approximate level with other low cost countries (see chart 1).

Even if China has more than 10% wage growth expectations over the next five years, the total manufacturing cost in China will be slightly higher than other low cost countries in five years, and will continue to be lower than the current level in the United States.

In addition, labor costs account for only 20%~30% of total manufacturing cost, and this cost alone will not increase the total production cost alone.

Moreover, China will have an obvious advantage in assessing the location of their manufacturing plants when enterprises assess their location.

In general,

It has become a leading global manufacturing base and has significant advantages over other low-cost countries that are still improving their initial infrastructure.

At the same time, China has established the reputation of being able to produce its replication products and design capabilities for innovative global companies.

And the world's innovative companies, such as Apple Corp, are turning their latest products to China.

At the same time, the mode of cooperation with local enterprises is becoming more and more attractive to some multinational companies.

Wei Shitong (Visteon) and its FAWER Visteon air conditioning control system in China, using its world-class manufacturing capabilities and localized design services, are providing heating and cooling products and systems for many Chinese and global automotive manufacturers.

The company expanded its production scale in Changchun to meet the growing demand.

Enlightenment: when a company considers the overall value of production in China, it should not only focus on labor wages.

Many other Asian countries, though low in wages, may have insufficient pport logistics or other uncertainties in the supply chain, which may lead to an increase in overall costs and risks.