China Still Has A Comprehensive Competitive Edge In The Eyes Of Global Manufacturers.

China is unique in comparison with the conditions offered by other low-cost countries.

In recent years, China has always been the world's factory, but recently, some factors are changing.

The question now is whether China is still competitive for global manufacturers as the cost is rising and the renminbi is likely to rise against the US dollar.

Some analysts pointed out that

This year's uncertain and conflicting events in China have not helped this problem.

Taking the high-tech field as an example, the unpleasant tit for tat between Google and the Chinese government, as well as the new regulations issued by China as part of the strategy of "independent innovation", require high-tech products sales enterprises to include Chinese intellectual property rights, which makes foreign enterprises feel uneasy.

However, some analysts believe that there are still many factors for multinational enterprises, the Chinese market is still attractive.

Compared with the conditions offered by other low-cost countries, China has unique advantages: low manufacturing cost, huge potential in the domestic market, and perfect supply chain, infrastructure and regulatory environment.

China still has temptations.

China's first trade deficit since 2004 has appeared to make it unlikely that the renminbi will appreciate significantly in the near future in March.

The deficit of $7 billion 240 million this month also shows that China's domestic market is expanding rapidly.

In terms of consumer goods, the increase in car imports ranks among the highest in the list of imported items, an increase of 170% over February.

The future prospects of China's rapidly developing domestic market are attractive to many enterprises.

According to the "2009-2010 years competitiveness survey of Chinese manufacturing industry" released by BoozCompany, the American Chamber of Commerce and management consultant, nearly 83% of the 202 enterprises surveyed indicated that the primary motive force for putting business in China is to provide products for China's big market.

This proportion has increased further compared with the 71% shown two years ago.

In addition to the importance of the domestic market, China has some advantages over some peripheral low-cost countries, such as political stability.

A few years ago, many companies tried to hedge their risk and adopt the strategy of "one China plus another country", that is, doing business in China and another neighboring country. Many of them chose Thailand as their business base.

However, the frequent political conflicts there are bad news for local enterprises.

Stable currencies have always been very helpful in raising predictability, facilitating budgeting and reducing costs.

The same study conducted two years ago found that the rise in the RMB exchange rate is the biggest concern of the surveyed companies.

But after that, the Chinese government's policy has proved that these worries are unnecessary.

In addition, the American Chamber of Commerce's research also found that "Chinese factories are still in the initial stage of implementing innovative production practices, but in some low cost countries around the world, such lean technology and technology are even more scarce."

Lin Lianyun, a partner in manufacturing and a manufacturing expert, said that another attraction factor in China is the "cluster effect".

China's "three largest" clusters are Shanghai centered Yangtze River Delta region, Pearl River Delta region from Hongkong to Guangzhou, and the Bohai Bay area centered on Beijing and Tianjin.

In these areas, enterprises can acquire "skilled labor, experienced local management personnel, raw materials and components supply, and perfect infrastructure".

Dr. Lin Lianyun said, "if we consider these four factors and look around the Asian countries, including the subcontinent, you will find that quite a lot of countries do not lack this factor, or lack of that element."

Manpower problem

However, China is still struggling with the most serious challenge facing economic growth: attracting and retaining employees.

The decline in export demand caused by the economic crisis means that there has been a decrease in the number of redundant workers and the intensity of the labour market.

But by the end of 2009, with the improvement of China's economy, there was a shortage of labor force again.

JP Morgan's "global data outlook" shows that in the fourth quarter of 2009, the demand for labor in China's major cities increased by more than that of supply. This is the first time the supply has been smaller than in the second quarter of 2008.

As a result, producers have to raise wages to attract workers.

Li Xinhui, director of Bosch Company, pointed out that "China's rising costs and the shrinking labor market are forcing companies to consider other options to carry out their low-cost, export oriented businesses."

The US Chamber of Commerce found that compared with two years ago, China's labor and logistics costs in 2009, and the competitiveness of the labor force's ease of access decreased.

In 2009, 28% of the surveyed enterprises said they planned to move or expand within China within the next five years, which was 17% after two years ago.

China's Midwest cities, such as Chongqing, Chengdu, Wuhan and Zhengzhou, are all possible destinations.

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In those factories that consider moving abroad, more than half said they would stay in Asia, and explicitly mentioned India and Vietnam as their first choice.

Latin America and Eastern Europe are listed as destinations for migration of second and third, but their scores are far lower than those of Asian countries.

Research shows that those in China are reconstructing their human resources strategy to attract and retain employees, including higher wages and training.

Most of the respondents, accounting for 79% of the total, said they are now providing training and career development opportunities for workers, rather than simply relying on pay to retain labor.

Li Xinhui said: "some leading enterprises are beginning to realize that after the recession of 2009, attracting and retaining talent means building up updated value proposition including how to grow business and development opportunities."

Dissecting sparrows

Although China can provide some valuable conditions, multinationals still need to be cautious when they invest and build factories in China, and take into account the advantages and obstacles encountered by different industries, and individually measure costs and benefits.

In the past three years, Dr. Lin Lianyun has participated in the decision making process of six enterprises for whether to make production in China. Only two of them have decided to invest in China.

Dr. Lin Lianyun believes that for many companies, China's business environment is changing.

If an enterprise wants to expand in 2007, it is no hesitation to come to China.

In recent years, however, in addition to rising costs, he has also pointed out the need to focus on the feasibility of the long distance supply chain, which is "prompting enterprises to reconsider the way in which China should be viewed as a potential manufacturing base".

Among the six enterprises, an industrial product company originally hoped to establish a joint venture, but could not agree on the terms of the contract with potential partners.

Another company that produces aviation components has decided to find another location due to concerns over intellectual property rights in China.

The third one belongs to the medical enterprise, which believes that the investment in China will outweigh the gains.

The fourth also decided not to invest.

However, a manufacturer of plastic products decided to enter the Chinese market, because the main demand for this product comes from the Chinese market.

Another company that produces industrial equipment is also decisive. It expects the Chinese market to become the focus of its business in the future.

Dr. Lin Lianyun said that China is generally competitive in terms of textiles, but it is not in the field of textiles with low added value and composite degree.

For example, China's competitiveness in sheet linen is not strong, but "men's shirts are different," he said.

This job is very complicated.

You need to cut out many different pieces of cloth. Sewing is very complicated. You also need to make cuffs, buttons and collars, and different sizes.

Then there are more complicated suits.

China is very competitive in making complex garments.

"China is also very competitive in household appliances and consumer electronics."

Dr. Lin Lianyun said that the competitiveness of Chinese enterprises in this area is a comprehensive reflection of low labor costs and high technology level.

"You can set up companies in other places, such as Kampuchea.

The cost of labor in these places is very low.

But the productivity and the familiarity with the industry are not high, and most of the raw materials need to be imported.

Facing the Chinese market

The worry is also that oil prices soared from $40 a barrel to $150.

All of a sudden, the cost of pporting goods from China to Europe and the United States became very important.

Although oil prices have stabilized now, "people are becoming more sensitive to the risk of new high oil prices," Dr. Lin Lianyun said.

Li Xinhui, boss of boss, said that in order to cope with these challenges, more and more enterprises began to design and implement "long-term strategy and pay more attention to product competitiveness and supply chain modeling".

However, no matter which industry or supply chain, another challenge that continues to change is how to meet the needs of Chinese consumers.

Chinese consumers are resources that are yet to be developed. They are also unknown, unpredictable and different flavors.

Xie Zuchi, chairman of Greater China in Bosse, wrote in the analysis of the study: "although China's market has opened the door to global products, Chinese consumers are also exceptionally localized, adhering to traditional customs and aesthetics, and there is a great difference between one region and another."

It is hard to predict which way Chinese consumers will go in the market and changing tastes. "

In conclusion, Dr Xie suggested that "those who try to get a share in the Chinese market must not be complacent. They must pay attention to the upgrading of production processes, retaining talents, strictly controlling costs, and understanding their customers."