China's growing market the new selling point for multinationals
Dan Steinbock says that while some multinationals are reconsidering their operations in China, many more are staying - with an eye on the country's growing consumer market
Multinational companies are reassessing their operations in China, where costs are climbing, and in emerging Asia, which still offers significant cost advantages. The realities, however, are more complex.
Media reports say rising labour costs and cheaper US energy are driving some companies back to the United States. The fast-rising cost of living in the mainland's international cities, such as Beijing and Shanghai, is also contributing to decisions by multinational corporations and their expats to change location.
Over the past five years, I have participated in several conferences which have highlighted these issues. As yet, there has been no such massive production shift.
Three decades of rapid growth have had an impact on Chinese wage levels. Nonetheless, international indicators at least suggest that, in Beijing and Shanghai, these levels remain some 20per cent of the benchmark level in New York City.
Times may be changing, but not in the way the public debate presumes. First, there is nothing new in the shifts of manufacturing locations across the world. Take two very different examples: textiles and electronics manufacturing.
Recently, a blaze outside Bangladesh's capital killed 112 workers. And that was only the latest site in the race to the bottom in the textile business. The new global supply chain comes with a combination of ultra-low labour costs, maximum flexibility and delegated authority that offer undeniable advantages - and considerable risk.