Further confirmation of the gradual manufacturing shift away from China and towards regional frontier markets in an Economist piece this week (“Culture Shock”) about how the rising number of labor disputes in China (largely revolving around wage increases) is beginning to intensify the country’s “shift from being the world’s workshop to its shopping mall: as employees demand and get higher incomes, the country’s attractiveness as a manufacturing base ebbs but its appeal as a consumer market grows.” While companies’ collective response has to some degree been in part to mollify the wage demands, “firms with labor-intensive work have been shifting it to cheaper Asian countries like Vietnam, Thailand and Cambodia. Uniqlo, a clothier, plans to reduce its proportion of Chinese-made garments from 90% to 65% in the next three to five years.” Of course, foward-looking investors are already contemplating the next logical step. Per Paul Collier, a professor of economics at Oxford, “over the past three decades, offshoring shifted labor-intensive manufacturing from the OECD countries to Asia. In the next decade, expect the same process to begin shifting these activities from Asia to Africa.”
JGW
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August 5, 2010 at 9:59 pm
Vietnam: low cost labor a myth? « Frontier Markets
[…] 5, 2010 in Vietnam We’ve documented previously the thesis that low-wage countries like Vietnam will continue to displace China as the […]