We’ve said it before but how long will it be before China is no longer the home of cheap manufacturing? According to Business Week magazine, labour shortages in the land that once propelled human reproduction into the Guinness Book of Records are propelling wages to even greater heights. In some industries, wages are reported to have risen by 40% or more last year and staff are becoming more mobile and more choosy.
David Warth, general manager of Emerson Climate Technologies, told Business Week that job turnover in his company in China is running at 20% per year and he is struggling to keep his 800 employees from jumping ship to other hi-tech multinationals.

Turnover in some low-tech industries is said to be approaching 50% and there are said to be 2.5 million jobs unfilled in Guangdong Province.

Pressure to increase prices is growing despite continuing increases in productivity.

The wage issue has caused some companies to rethink their Chinese operations. Some are said to be considering relocating their manufacturing facilities deeper into the interior – where salaries and land values are cheaper – or moving abroad to even lower-cost countries.

Meanwhile, question marks still hang over Chinese companies’ ability to crack the UK market. The fact that they can produce phenomenal amounts of equipment at really low prices is undeniable but they have so far failed to gain anything more than the flimsiest fingerhold on the UK market. The Japanese are already firmly established, thanks in no small measure to a vast expenditure on marketing, something which the Chinese have so far failed to grasp. Clearly, despite what the cynics might say, price is not the be all and end all in gaining a significant share of the UK market.

That said, China is still showing remarkable growth rates as a result of its headlong rush to embrace the free market economy. Such is their attitude that in a recent opinion poll conducted by the University of Maryland 74% of all Chinese inhabitants agreed with the proposition “The free enterprise system and free market economy is the best system on which to base the future of the world”. In fact it was the developing countries who were generally the most enthusiastic in their agreement. China was top of the tree, the Philipines was next with 73%, with India and South Korea in joint fourth with 70%, just behind the USA with 71%. In all the countries polled, more people agreed with the proposition than disagreed, except one. The one exception was France where only 36% agreed against 50% in disagreement.

Actually, I’m not sure that doesn’t make me like the French just a little bit (more?).

Neil Everitt

Editor