Is China still a good option for manufacturing?
There has been a lot happen over the last couple of years and this question has arisen for several reasons. We have seen large political and economic shifts.
Until around a year ago, there was upwards pressure movement on prices from factories in China. This was due to the strength of their currency, the RMB compared to the USD. Chinese factories essentially only charge in USD and hence they needed to raise prices to keep their intake equitable. They also faced then, as well as today, increasing wages being paid to their workers. These pressures forced prices upwards. Even so, it is still a very good place to do business and the prices charged are still very fair.
Our US clients have also posed the above question recently. Because of the US/China trade wars, tariffs have been imposed of up to 25% on Chinese goods entering the USA. Essentially, this tax has increased prices of goods entering the USA by 25%. This does cause a lot of issues to US companies and we do expect the cost of local retail items to be increased to cover this cost. This still makes China a good place to do business for US companies, however it makes other countries much more competitive. We expect that other countries such as India, Thailand and Vietnam to try and take advantage of the situation. Of course, the difficulty is that China has the infrastructure already set up and the knowledge when it comes to making all sorts of items. This will take a lot of time to transfer in the scale we see in China to other countries. We are finding companies taking a wait and see approach as no one really knows if the tariffs will be permanent or removed in the short term.
Other countries though, do not have this problem. Australia, for example has a free trade agreement with China and many items are completely duty free.
China is still a great place to have your products made due to its pricing and ‘know how’. The world will never stay the same but so much of China’s growing success has come about due to the hard work of its people and their ability to make things. We expect China to be strong in this area for years to come.