Is China still a competitive location for overseas manufacturing? Certainly the nature of manufacturing in China is chaining rapidly, as this 4 minute video from the Financial Times explains. It features European firms that moved their production to China several years ago. However, as wages in China have risen rapidly in recent years, it becomes less cost-effective to make low value-added products in China.
One strategic response illustrated in the video is to “move up the value chain”. That means making products which have higher added value and which command higher selling prices. Typically these kind of products are sold into niche market segments rather than mass markets where products are less differentiated.
The move to making higher margin products has led some to question whether China has lost is cost advantage? Chinese manufacturers are under pressure - but moving up the value chain seems to be the answer.
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