As China continues along its development path, costs are rising in the country. This fact has both negative and positive consequences for foreign companies: while it will add to the production costs of locally-based manufacturers, it is also indicative of an increasingly affluent Chinese consumer class. Our research indicates that, if manufacturing capacity elsewhere in Asia can reach 70 percent of Chinese capabilities, lower ASEAN operating costs means it is a viable proposition to relocate. This is a generalization of course, and variants will affect Individual business models, but this holds true as a general rule of thumb.
It is worth pointing out that, when broaching this subject with a Chinese production manager, there will inevitably be resistance against uprooting or even relocating part of any Chinese production facility. This means that the economic cost data analysis to determine just how competitive your China operation is needs to be conducted by non-Chinese managers.
In this issue of Asia Briefing magazine, we provide a comprehensive overview of the cost of doing business in China compared with the Association of Southeast Asian Nations (ASEAN). We analyze some of the key considerations that will impact upon the profits of an Asia-based business, including labor costs, social welfare, and industrial land prices. In addition, we take a look at how ASEAN’s export volume and GDP per capita currently compares with China.
Recent EU and U.S. surveys have both concluded that it is becoming harder to maintain profitability levels in China. For certain businesses, now is the right time to be evaluating options.
Originally published by Dezan Shira & Associates, a fellow LEA Global member.