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Mr Harsha

By | November 2012
Page 1 of 12
Assignment 2|
By: J Sree HarshaRoll no: U111055|


The rising costs in China and its demographic issues

The article looks at the rising costs in China and how it would have an impact on Chinese economy and its manufacturing industry. China is the world’s largest manufacturer. In fact it accounts for one fifth of the global manufacturing output. However, all might not be that rosy for China in the coming years. Few things which have allowed many of the firms from the developed nations to set up units in china are the availability of cheap land, less regulations and most importantly the low cost of labour. However, as per data released by standard chartered, the wages have already increased by 10 %. In few scenarios, the salaries have risen as high as 25%. It is to be noted that 91% of companies consider rising costs as the biggest challenge to operate in china. Something which might be even more worrisome for the supporters of China is the fact that the cost of manufacturing might increase by three folds in the coming few years. This clearly shows that China is poised to lose its advantage in the years to come. It is to be noted that China is lobbying hard in US so that labour reform laws are passed in its country. Most US firms have threatened to pull out of china if that happens as they would no longer find it viable to operate in China. However, the article also talks about how few companies still prefer to operate in China and might continue doing so in future. The availability of a reliable supply chain and availability of talented and efficient labour have been two prime reasons for these companies to stick around. In fact, few companies even believe that it’s not the cheap labour but the talented labour which the companies are looking for in China. Places like Sri Lanka, though they provide cheap labour, are not attractive enough because of lack of efficient labour. The wages in China might be raising, so has been the...

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