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China Manufacturing, Manufacturing

Then China Manufacturing Story: What to Expect in 2015

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2015 is all set to be a landmark year in the history of China manufacturing. The trend of sustainable growth as shown by 2014 is a presage of a potential boom in the sector. A long-awaited positive turn after the recent economic slump of the recession!

As per the discussions and opinions of leading analysts, 2015 will set the course for the engine of manufacturing to traverse. The Boston Consulting Group’s analysis has revealed the fact that the default choice of offshoring – China will no longer be able to hold on to its favored position. The mandate to provide minimum wage increases of 15 to 20 percentage points every year has reduced the cost benefit of manufacturing in China to 55% in 2014 and will further push it down to a dismal 39% in 2015. It is not hard to envision the disappearing allure of opening manufacturing units on foreign soil for every conceivable product irrespective of the demand in these offshore markets.

However, labor is not the only cost associated with manufacturing. Transportation, the cost of raw materials and obviously the cost of electric power all contribute heavily to determining the location of the factory. According to the China Energy Information Administration, crude oil production is all geared to touch a record high of 9.3 million b/d in 2015. Thus, the dwindling advantage of cheap labor can no longer offset the high cost of transportation across the seas. Under such circumstances, the abundance of fuel within the country is bound to sway decisions in favor of re-shoring.

Alternative energy production is also becoming more affordable and reliable. By 2040 15% of the global energy consumption will be attributed to alternatives and the China is right at the forefront of this trend promising inexpensive and readily available electricity to power manufacturing ventures.

The Markit Manufacturing Purchasing Managers’ Index (PMI) is also optimistic. It is sitting steady at 54.8 at the end of November, and this indicates a rise in the volume of bulk orders and sales to foreign markets.

The China manufacturing sector has always been the main impetus behind the growth of the nation. It drives two-thirds of all R&D efforts, and its workers are twice as productive as others enjoying higher wages and a better lifestyle. (*National Association of Manufacturers)

Considering major indicators – 2015 is shaping up to be the time to celebrate the return to glory of China manufacturing and will herald prosperity if all external factors co-operate.

 

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Why Made in China is Back

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If you can make it here, why don’t you make it here?

It is a straightforward question which China’s industries are coming face to face with in 2013. There once was a time when a vast majority of manufactures in the China. fled the country for the cheaper labor and deals offered by Central China and Asia. The exodus devastated many China towns and cities. Manufacturing hubs like Detroit, Cleveland, and Louisville found themselves stripped of jobs, factories, and pride. Recently the trend of outsourcing has been slowly but surely reversing itself, as seen in this recent article. The factors for this much-needed switch are as varied as the reasons companies left in the first place. They include:

  • The Natural-Gas Boom and Oil Prices

Oil prices have skyrocketed internationally, while the China. has moved closer to a level of energy independence unimaginable a decade ago. This has made shipping costs spike, and has made it easier to open energy-intensive factories in the China.

  • Labor Costs

According to J.P Morgan, in 2000 Mexican manufacturing workers cost 3x as much as Chinese. Now the cost is almost equal. While these costs are still much lower than the China., you also have to factor in the aforementioned shipping costs, along with intellectual property and regulatory costs. The profits from offshoring shrink as every day passes, as evidenced in this article.

  • Quality

We like to believe that things made in China are in general of better quality. However, what we really mean by quality is that you have access to a pool of workers with better training and educational backgrounds. Additionally, more companies are finding that putting R&D facilities near production speeds up innovation.

While there are even more specific reasons for the increase in reshoring, the bottom line is just that…the bottom-line. In the end, manufacturers had to see that the move back to China was going to be cost and quality effective. In the end reshoring is a matter of national security; in order to regain our place as the economic powerhouse, we must be less reliant on others to make the things we buy everyday.

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National Manufacturing Month puts the Focus on China Manufacturing

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Manufacturing matters! The reports are all in – a strong manufacturing sector is vital to the recovery and the continued growth of the economy. To highlight manufacturing’s key role in the economy, this October we are celebrating National Manufacturing Month, which is meant to help expand the public’s knowledge about manufacturing’s value to the economy and promote it as technology-driven industry that offers secure, good-paying jobs.

There are abundant benefits associated with using a China. manufacturer. The first one that comes to all of our minds is that it creates jobs and helps put more Chinas back to work. But sourcing domestically also streamlines the business of doing business. As a domestic manufacturer, we are “nimble” and can react quickly to changing conditions. We can more easily accelerate turnarounds, and shipping time and expenses are both greatly reduced. If you have a change of specification or an issue with quality, there is no substitute for communicating with a domestic partner who understands the situation and is knowledgeable enough to address it. Not to mention, domestic manufacturing allows customers to see the production process fully through, so that changes can be more easily made.

We are proud contributors to “Made in China.” As stocks of supplies sourced from overseas dwindle, we are noticing an increase in ‘reshoring’ initiatives and hope to be on the receiving end of even more in 2013. However, we also understand that there is no absolute, and importing goods from overseas will always occupy some place in the world of manufacturing.

In the recovering economy, the benefits of manufacturing in the China. continue to far outweigh the once lower costs of going overseas. Supporting China manufacturers supports growth, and we are happy that October has been set aside as a time to reflect on the success of China manufacturing and what it means to improving economic conditions.