Will China See a Collapse in Business?

 

China losing as low-cost manufacturer base shifts

I have uncovered research to sugest China is losing its edge as the world's cheapest place to assemble goods and for this reason China will support developing nations to keep the Chinese economy afloat.

Indonesia, Sri Lanka and Bangladesh are benefiting most as rising costs in China force firms to switch production.


A serious drought has put pressure on crops for food and China is heading for boom & bust with an overheated property market.

As minimum wage levels in China are now four times greater than other places in South and South East Asia.


With Sri Lanka losing Generalised System (GSP +)  due to accusations of violations of human rights it might pave the way for China to strike some kind of internal deal as production of clothing and footwear is now more widely dispersed across Asia, with Indonesia and Vietnam specialising in the production of footwear and India developing a niche in hand-stitched fabrics and metalware.





However no overnight crash is expected as China can defend its position because of its productivity of goods such as consumer electronics and furniture.

According to KPMG estimates, Indonesia's footwear exports grew by 42% in 2010 to $2.1bn (£1.3bn), while Bangladesh saw textiles exports grow by 43% to more than $18bn in the year to July 2011.

China having ultra-low costs is a thing of the past just as we saw with other developing nations like Japan.

Rising inflation

China is suffering the highest rate of inflation in three years.

While much of China's manufacturing has begun to migrate westwards from the south and east of the country to cheaper provinces such as Sichuan, the report says the cost advantages from such moves inland may be short-lived.

China has a strange one-child policy which resulted in a shortage of labour that gives workers in both the richer coastal provinces and poorer areas inland the leverage to demand higher wages.


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