China’s labor costs are rising fast and report by the Steve Johnson in the FT, however, reveals that China’s average wage level has tripled between 2005 and 2017 and now stands higher than in Brazil, Argentina and Mexico. China’s labor costs have been catching up to those of more developed countries. In spite of that there is practically no decline noted in the sector of sourcing in China.
According to the market experts, there are several crucial factors that are mainly responsible for the stability in China sourcing. Let’s figure out the causes why despite the rising labor cost there is no decline in the China sourcing–
- It has been noted that Chinese sourcing agents and Chinese manufacturers are more likely to give you better service than your domestic manufacturers. The reason is, dealing with the foreign clients is their daily routine. This practice has made them seasoned professionals with utmost knowledge about the demands and requirements of the clients of a particular country. So quite obviously they are far more professional, knowledgeable and easy to work with guys that you can’t find in any other country. This is one of the primary reasons that prevent the decline of the China sourcing despite the rising labor cost.
- China also has abundant raw materials, particularly steel, aluminum and rubber, also at much lower prices than could be expected elsewhere, coupled with a good, developed industrial base, a good communications network and a stable, still-growing economy. Maximum number of factories in China have improved a great deal with respect to manufacturing capabilities, efficiency, management sophistication, and customer service.
- China has advantages when it comes to manufacturing over other Asian countries. One reason for this is the experience and education the country has in delivering products that adhere to the rigorous standards that are required by both western legislation and consumers.
- China has introduced an educational system under which schools are primarily run by the government with the support of various sectors of society. At present, Nine-year compulsory education is now being implemented by stages and in a systematic way. In areas inhabited by 91% of the entire population, the goal of universalizing primary education has been attained. Enormous progress has been made in higher education, vocational and technical education, adult education and education of the ethnic minorities. There is no dearth of skilled and educated labor in China that is another important factor that attracts businesses from all over the world to set up a manufacturing unit in this country.
Along with the above-mentioned reasons, Chinese suppliers and logistics service providers are capable of responding appropriately to the demands of the global businesses. Although there is a surge in cost, buyers and manufacturers continue sourcing in China because of the high ROI, extensive infrastructural development and industrial growth.