China high production cost makes high efficiency life

China high production cost makes high efficiency life

Travel by ferry from Hong Kong to Shenzhen, in one of the regions that makes China the workshop of the world, and an enormous billboard greets you: “Time is Money, Efficiency is Life”.Seen from market, all of things you will know.
Joerg Wuttke, a veteran industrialist with the EU Chamber of Commerce in China, predicts that the cost to manufacture in China could soar twofold or even threefold by 2020. AlixPartners, a consultancy, offers this intriguing extrapolation: if China’s currency and shipping costs were to rise by 5% annually and wages were to go up by 30% a year, by 2015 it would be just as cheap to make things in North America as to make them in China and ship them there (see chart). In reality, the convergence will probably be slower. But the trend is clear.
Kolcraft’s experience is typical. When the American Chamber of Commerce in Shanghai asked its members recently about their biggest challenges, 91% mentioned “rising costs”. Corruption and piracy were far behind. Labour costs (including benefits) for blue-collar workers in Guangdong rose by 12% a year, in dollar terms, from 2002 to 2009; in Shanghai, 14% a year. Roland Berger, a consultancy, reckons the comparable figure was only 8% in the Philippines and 1% in Mexico.
If cheap China is fading, what will replace it? Will factories shift to poorer countries with cheaper labour? That is the conventional wisdom, but it is wrong.
However, there are many advantages for China to be a powerful country. Sunil Gidumal, a Hong Kong-based entrepreneur, makes tin boxes that Harrods, Marks & Spencer and other retailers use to hold biscuits. Wages, which make up a third of his costs, have doubled in the past four years at his factories in Guangdong. Workers in Sri Lanka are 35-40% cheaper, he says, but he finds them less efficient. So he is keeping a smaller factory in China to serve America and China’s domestic market.
 Second, Chinese wages may be rising fast, but so is Chinese productivity. The precise numbers are disputed, but the trend is not. Chinese workers are paid more because they are producing more.
Third, China is huge. Its labour pool is large and flexible enough to accommodate  industries that make , , Christmas lights or toys, says Ivo Naumann of AlixPartners. Not the next day. Midnight. Nowhere else are such feats feasible.