Survey says China is losing its manufacturing edge

March 28, 2008

A recent survey by the Shanghai Chamber of Commerce indicates that China is losing its manufacturing competitiveness in some industries and that companies need to upgrade their operations to stay profitable.

The survey, “China Manufacturing Competitiveness”, found that more than half of the 66 foreign-invested companies responding believe China is losing its competitive edge to other “low cost” countries such as Vietnam and India. The survey comes at a time when reports that thousands of manufacturers, Chinese and foreign-owned, are moving operations away from China’s coastal regions, where labor and other costs are escalating, to inland areas or other countries.

"The days of easy China manufacturing are at an end," Ted Hornbein, chairman of the American Chamber of Commerce in Shanghai's Manufacturers Business Council said. "You can't just view it as a workshop anymore."

Most of the companies surveyed were based in eastern China near Shanghai and said wages are rising 9 to 10 percent per year and costs of raw materials are up more than 7 percent.

The report indicated that manufacturers of low-cost products such as shoes, clothing and toys are shifting production to inland regions of China where wages and other costs are lower, or are moving to other developing countries.