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Survey Says China Losing Its Manufacturing Edge

China's era as a low-cost, manufacturing-for-export market appears to be coming to an end.

By John McCloud | Updated on March 31, 2008

SHANGHAI-China’s era as a low-cost, manufacturing-for-export market appears to be coming to an end, according to a new study by New York City-based management consulting firm Booz Allen Hamilton and the American Chamber of Commerce (AmCham) Shanghai. The first annual study, China Manufacturing Competitiveness 2007-2008, finds that a stronger Chinese currency and rising wages are putting pressure on manufacturing margins, while failures to deploy operational best practices are limiting profits.

“The manufacturing philosophy employed by many foreign multinationals in China in recent decades is in need of an overhaul,” observes Haddock. “China’s changing cost and currency structure have shifted, forcing companies to rethink how they structure their Chinese operations and how they perceive China in their overall global strategy. At the same time, China is increasingly a major source of product and business model innovation. We’re seeing globalization at work and China’s role has changed.”

The study surveyed 66 of the 600 largest foreign-owned or foreign-invested companies manufacturing products in China. Results show that more than half believe the country is losing its competitive edge in manufacturing to other low-cost nations, with nearly one in five manufacturers surveyed indicating concrete plans to relocate or expand China operations to other countries. Vietnam and India are seen as the top alternatives.

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