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kungfuman
Joined: 31 May 2012
Posts: 1749
Location: In My Own Private Idaho
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 Posted: Thu Apr 25, 2013 9:04 am Post subject: Is the bottom falling out of China ESL? |
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I have read several articles about companies pulling out of China as the cost of doing business here is getting higher daily. With the belief that so many English teaching positions materialized because of China's economic growth, do you think there is a long term future for Laowiu teachers?
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Article:
By 2015, Producing in China Will Be as Costly as US
By Philip LeBeau | CNBC � Thu, Apr 18, 2013 10:14 AM EDT
Walk onto the shop floor at Prince Industries in Shanghai, China and it looks like most other manufacturing plants in this country. It's busy running two shifts, cranking out components that will be shipped to major manufacturers like Caterpillar (CAT), Siemens (XETRA:SIE-DE), and Honeywell (HON).
But change is in the air.
The cost of manufacturing in China is going up, and quickly.
"It's something that we anticipated when we went to China, we just didn't know how quick it would happen," said Mark Miller, CEO of Prince Industries.
(Read More: China January to March FDI at $29.9 Billion, Up 1.44% Year-on Year )China and US Costs Even by '15
China is no longer a slam dunk for manufacturers looking for the lowest cost for operations.
In fact, a new study by the consulting firm AlixPartners estimates by 2015 the cost of outsourcing manufacturing to China will be equal to the cost of manufacturing in the U.S.
"The Chinese manufacturing cost advantage has eroded dramatically in the last few years," said Steve Maurer, AlixPartners managing director. "If you go back to 2005, it was pretty common for landed cost from China to be 25 to 30 percent less than the cost of manufacturing in the United States. Based on our analysis, two-thirds of that gap has closed."
Maurer said higher labor wages, the rising value of China's currency, and the cost of shipping goods from China to points around the world have made manufacturing in China more expensive.
"If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years," said Maurer.
Higher Wages, Rising Currency
Since Prince Industries opened its plant in Shanghai a decade ago, wages have increased an average of 12 percent annually, while China's currency, the RMB, has appreciated 25 percent vs. the U.S. dollar.
The rising value of the RMB was expected and has made it more costly to ship goods built in China around the world.
Meanwhile, hourly wages have been going up steadily due to China raising minimum wages, while competition for labor has forced manufacturers to pay more to attract skilled workers and keep them.
Pulling Out of China or Moving Further Inland?
As the cost of manufacturing in China has risen, so have reports of companies pulling their plants out of the country to find cheaper locations.
Some have re-shored facilities to the U.S., where cost differences are offset by higher productivity of American workers.
But few expect a mass exodus of manufacturers in China.
"I don't think companies are going to pull out of China," said Hal Sirkin with the Boston Consulting Group. "Because of Chinese domestic demand which is growing at 8 or 10 percent a year, even if they decide to pull out their export plants they will then convert those plants, basically re-tool them into Chinese consumption because there is a great market in China given all that growth."
Sirkin said manufacturers squeezed by higher costs in more expensive cities on the coast of China like Shanghai will increasingly look to move plants to inner or western China where labor costs are lower.
"Some companies have found success in inner China and others have decided it is not worth it for them because they cannot get the productivity that they need," said Sirkin.
Made in China and the US
Even with manufacturing costs rising in China, Prince Industries has benefited from expanding its operations outside Chicago to include a plant in China. Since making the move into China, the firm's annual revenue has doubled to $40 million.
Much of that growth is spurred by the Prince Industries plant in Shanghai supplying customers who are manufacturing in China.
Given the changing market, would CEO Miller still expand to China?
"I think for us it made sense, it doesn't make sense obviously for every U.S. manufacturer," he said. "Once we announced that we were going to China, we had to convince our U.S. workforce that we weren't going to move all of our manufacturing to China and just become a shell over here. Fortunately for us it worked out."
http://finance.yahoo.com/news/2015-producing-china-costly-us-141454768.html
http://finance.yahoo.com/news/forget-china-meet-21st-centurys-193000437.html
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roadwalker
Joined: 24 Aug 2005
Posts: 1750
Location: Ch
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| Posted: Thu Apr 25, 2013 2:30 pm Post subject: |
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| China is still set up wonderfully as a manufacturing country, with the ability to transport by air, sea, road and rail, and with a good labor force. There will still be jobs for English speaking Chinese young people, whether or not foreign manufacturers pull out. Too much research is written and published in English and the world and its customers speak English. So Chinese manufacturers need English. Plus tourism is a major Chinese industry. Non-Chinese-speakers want to come and see 5000 years of history and all that. And those people eat and stay at hotels and take transportation and go to hospitals. English, English, English. |
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wangdaning
Joined: 22 Jan 2008
Posts: 3154
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| Posted: Thu Apr 25, 2013 10:32 pm Post subject: |
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| I don't really think the raising cost of doing business here is a reflection of China's economy going south. Seems more of an indicator of development. |
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Asiateacher
Joined: 03 Apr 2013
Posts: 22
Location: Shenzhen, China
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| Posted: Sat May 04, 2013 10:18 am Post subject: |
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| We have at least 500 years left... hehehe |
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GreatApe
Joined: 11 Apr 2012
Posts: 582
Location: South of Heaven and East of Nowhere
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| Posted: Tue May 07, 2013 12:38 am Post subject: |
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@ Asiateacher 
--GA |
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JustinC
Joined: 15 Mar 2013
Posts: 138
Location: The Land That Time Forgot
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| Posted: Tue May 07, 2013 1:15 am Post subject: |
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"If trends continue, the China cost is going to be on par with U.S. cost in the next four to five years," said Maurer.
Yeah, extrapolating is the best. Yesterday I walked back from the shops, which took 30 minutes. Normally I'll get a taxi bike back which takes 5, so I was out 25 minutes longer than normal. If trends continue in 4-5 years I will be a platypus!  |
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wonderingjoesmith
Joined: 19 Aug 2012
Posts: 910
Location: Guangzhou
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| Posted: Wed May 08, 2013 1:18 am Post subject: |
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| I don't think costs will be the factor, the product quality may however. In State the "Made in China" is not as bad as here on mainland, yet, in my opinion, it doesn't match the overall reliability of American or Japanese products. Chinese manufacturers cut corners, bring in cheep labor, machinery and expect to become "rich and famous" overnight. The ESL in this country may just go down for similar reasons. |
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