Despite the rising input costs and stronger RMB, China remains the top destination for global sourcing. Here are some of the reasons:

§          Efficient supply network: A capable Chinese manufacturer in the more developed Pearl River Delta and Yangtze River Delta areas is typically supported by specialized suppliers such as component suppliers, mold makers, heat treatment and plating facilities and equipment manufacturers located either within the same province or in the same quarter of the country. Geographic proximity boosts economic efficiency.   

§          National infrastructure: The heavy investment in highways, railroads, seaports and airports across the country over the decades has created a national transportation system that increases economies of scale and reduces unit cost of product for China-based manufacturers.  

§          Lower operating cost in inland provinces: Manufacturers in the coastal areas are setting up production lines in neighboring inland provinces where operating cost is much lower. The cost for leasing factory buildings in Jiangxi province, for example, is about 1/3 the level in Guangdong province and the labor cost is about 30% lower. The inter-provincial highways are conductive for the regional integration.  

§          Higher productivity of manufacturing companies: During the past decade, the annual increase of average labor productivity at larger Chinese industrial enterprises is over 20%. The productivity gains, largely attributable to the rapid development of non-state companies, are in effect offsetting the rising labor cost.     

To set up or restructure your China supply chain, contact ChinaLine today.