Is Chinese manufacturing heading for a crisis?

Welcome to another blog, lovingly handcrafted while slaving away over a hot CAD terminal here at Amalgamated Products Limited, ‘somewhere in England’. Like a lot of companies in this Fair Isle, we design and market our assortment of machines and widgets here, yet manufacture them in China.

I have oft had to counter the occasional passing comment at dinner parties of ‘it’s a shame you don’t still make your machines and/or widgets in Britain’, with the undeniable truism ‘if we did they’d cost so much more than our competitors’ that you wouldn’t buy them’. Such is the tightrope that one has to walk with a fickle public in a capitalistic society.

Of course, it is not without irony that we, like others, have found the solution to our manufacturing conundrum by turning to China. The most successful Communist country in the world has a large resource of people and a reasonable resource of raw materials; did you know, for instance, that it is the fifth-largest producer of oil? This, coupled with a national willingness, has allowed cheap manufacturing to the extent that the problems of the large distance between the business centre and the market have been nullified.

It has to be said as well that, although things may not have been ‘squeaky clean’ in the past, no longer is China generally seen as flying fast and loose with safety or IP protection. It is true that the ubiquitous ‘copy watch’ entrepreneur will still try to accost you like a 1940s spiv on leaving the airport, but things really have come on an awful long way. In many ways, that’s the problem.

“No longer is China seen as flying fast and loose with safety or IP protection”

China has successfully built its economy on the back of its cheap manufacturing and, like Asian tigers before, now finds that the populace are financially empowered to the point where they see a future beyond lengthy shifts stood at machine tools for a piffling wage. Here at Amalgamated Products, we have already heard of one Chinese manufacturing company having to invest in automated plant. This is because the potential staff have their hearts set on going off to be IT experts or accountants, preferring a future where they can swan about in Mercedes and wear Gucci sunglasses - real ones, naturally.

Automated plant is a tad expensive and, assuming this trend continues, the dragon (or tiger) will soon lose its teeth. The obvious question then is ‘where to next?’ Eastern Europe has had a few civil wars in the painful process of reinventing itself but is now settling down as a cheaper manufacturing base than western Europe, while also being somewhat closer than China.

Equally, India is coming to the fore, having the twin advantages of a large resource of people and a large market to sell into. However, your humble servant guesses that China has probably got a planned solution to its own manufacturing conundrum already in place and, what is more, opines it’s no accident that it is currently pouring money into Africa.