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Adela CHMELOVA

dAuvergne

Erasmus students Universite

Ioana NISTOR
Economics

2014-2015

Made in Chinanot anymore?

Summary: China is falling behind in the global manufacturing race as rising wages
and energy costs put pressure on the Asian country, synonymous with making super
cheap stuff. According to new data released, China is among several economies
whose manufacturing price advantage over the U.S. is eroding. In the main time
moderate wage growth and lower energy prices are making the U.S. and Mexico
more desirable manufacturing destinations. More U.S. businesses are likely to
produce goods closer to home in the coming years. As labor costs in the "world's
factory" continue to rise dramatically, global fashion brands are looking elsewhere
to source apparel. China will shed approximately 85 million manufacturing jobs in
the coming years which could be a golden opportunity for economic development
for new players like: Myanmar, Haiti and Ethiopia, among others, who are looking to
rejuvenate a once-thriving trade or even build one entirely from scratch. Recently
released figures showed the wider Chinese economy growing at its slowest pace for
more than five years. It showed that factory output contracted in November for the
first time in six months. To ensure enough jobs are created for China's huge and
increasingly-educated population, the government aims to achieve 7.5% economic
growth in 2015, although many analysts believe it will struggle to meet this target.
There is speculation it may take further steps to boost growth: "We still see
uncertainties in the months ahead from the property market and on the export front
[and] we think more monetary and fiscal easing measures should be deployed" Hongbin Qu, Chief China economist.
Brief summary: It used to be a simple rule: Manufacturing is cheaper in Asia, but it's
fundamentally changed. We see China as getting much more expensive: it is 4
percent less expensive to manufacture in China than America. As businesses
continue to recalculate the costs of manufacturing in China, some industries are
forecast to reach a tipping point in around 5 years and begin shifting manufacturing
to the U.S. In addition, Ethiopia's access to a continental market with 6 of the 10
fastest-growing economies makes the so called "China 30 years ago" an attractive
long-term investment.

References: Heesun Wee, Why the 'Made in China' model is weakening, 19 Aug
2014, http://www.cnbc.com/id/101920959 [ref. of 25 november 2014]..
Nathan Siegel, Not Made in China, 2014, http://www.ozy.com/fast-forward/guiltfree-fashion/31106 [ref. of 25 november 2014].
Martin Patience, China manufacturing growth slows, PMI survey suggests, 2
November 2014, http://www.bbc.com/news/business-29870588 [ref. of 25 november
2014].
It used to be a simple rule: Manufacturing is cheaper in Asia, but it's
fundamentallychanged. We see China as getting much more expensive, and is
falling behind in the global manufacturing race as rising wages and energy costs put
pressure on the Asian country, synonymous with making super cheap stuff.