Did you know that 31 percent of Buyers currently sourcing overseas say that they are researching bringing a portion of their production back to North America? More than 80% of 202 manufacturers surveyed said their primary motive for being in China is to provide products for the Chinese marketplace, up from 71% two years ago.Having served the world as a manufacturing base for decades, is China still competitive for manufacturers? A number of factors indicate that its competitive lead will be chipped away, not least if the renminbi is allowed to appreciate against the U.S. dollar and costs rise. Some experts predict that low-value-added exporters may be driven elsewhere while manufacturers of high-value-added, complex products for domestic consumption will face even stiffer competition to thrive. Against this backdrop, as a new survey suggests, manufacturers in China are learning quickly about staying competitive in this ever-shifting landscape.
It certainly doesn't help matters much that there's uncertainty and tensions brewing on a number of fronts. Among the foreign IT industry, for example, the ugly exchange between Google and China, and a new rule that stipulates sellers of high-tech goods must contain Chinese intellectual property as part of an "indigenous innovation" campaign, have rattled nerves.
Yet despite all this, experts say there's much that's working in China's favor. Costs are still low and the skills level is high. Meanwhile, the pent-up demand of a potentially huge domestic market combined with improving IT, infrastructure and regulatory regimes all put China well ahead of other low-cost countries.
While the recent announcement of China’s first trade deficit since 2004 makes it unlikely that the renminbi will be allowed to appreciate against the U.S. dollar much soon, March's $7.24 billion deficit is also a sign of the fast expansion of China’s domestic market. The auto sector, for example, was up 170% in March from the previous month.
