Global manufacturing is shifting from China to Southeast Asia, and one of the main reasons is the significant increase in labor costs in China.
For every dollar increase in labor costs in China, manufacturing companies increase their production costs by 20 cents. Bill Acharya, head of human resources at General Motors, told the Global Times, "If the salary** reaches $40 per dollar, the company's costs will grow to $150 per dollar." At present, GM's production cost in China is only more than 100 yuan per dollar. ”
Such comparisons occur more among local Chinese companies than among European and American companies.
China's labor cost advantage.
Since the 90s of the last century, China's labor costs have risen rapidly, and the minimum wage standard has increased from 30 yuan per month in the early 90s of the 20th century to more than 1,000 yuan today. At the same time, China's manufacturing industry has also transformed from a labor-intensive industry to a technology-intensive industry.
At present, China has become the world's largest manufacturing base, and the advantages of scale, low cost and complete industrial chain make China's manufacturing cost much lower than that of developed economies such as the United States and Germany. With the continuous labor costs, Chinese manufacturing companies have shifted some of their manufacturing links to Southeast Asia and other countries.
Comparative advantage of labor resources.
In the United States, the average monthly salary for manufacturing workers is $2,795, and for Chinese workers it is $1,530, which means that labor costs in China are about 30% lower than in the United States. This is a high number, but in other countries, such as in Germany, Italy or Japan, workers earn at least €1,400 or more per month.
While U.S. workers earn higher wages than in China, U.S. factories are much less profitable than in China. While the average profit margin for U.S. factories is 8 percent, compared to 5 percent in China, more profitable manufacturing has been shifted to countries such as India, Vietnam, and Indonesia.
"Cheap labor."
From the world's factory to the world's processing plant, China is becoming a manufacturing powerhouse, but in the eyes of many people, "cheap" labor is the biggest advantage of Chinese manufacturing. However, when the "Global Times" reporter interviewed some enterprises in the United States, Japan, South Korea and other countries, they admitted to the reporter that China's labor force is not cheap.
For example, Japan's Panasonic Company has invested in the construction of a refrigerator production line with an annual output of 1.5 million units in Suzhou, China, with a total investment of 4 billion yuan. According to the production plan, one production line needs 6,000 employees. But in fact, the project employs only about 1,000 people.
Behind the shift in global manufacturing.
Nowadays, the trend of global manufacturing transfer is becoming more and more obvious, and the United States, Japan, South Korea, etc. are stepping up the layout of a new round of global manufacturing centers.
How to transform and upgrade the manufacturing industry?
China is the world's factory, but not a manufacturing powerhouse, and the long-criticized labor cost problem is an important factor. As American economist Robert Shiller said, the core of China's manufacturing transformation and upgrading lies in "innovation" and "learning". China has also put forward the "Made in China 2025" plan, the core content of which is to realize the transformation from a manufacturing country to a manufacturing power.
In our research, we also found that although China's manufacturing costs are lower than some Southeast Asian countries, it also faces a number of challenges, the biggest of which is the lack of innovation capabilities. If we combine innovation and learning, we will find that there is still a lot of room for transformation and upgrading of Made in China. We once spoke to an American entrepreneur who said that the hardest part of doing business in China is how to get people to know you. We can see that most Chinese enterprises will innovate and transform while learning, but innovation is difficult, and transformation will be easy.
**10,000 Fans Incentive Plan