China has for decades been among the world’s leading manufacturers and exporters, due mainly to its low labor and land costs. However, over the last few years, the rate at which China labor costs have been growing, and the ever-increasing cost of land, has left many people to wonder if the reign of China as the world’s most cost-effective workshop might be coming to an end.
Rental and purchase prices for factory land in China have been going up for over a decade. Average factory salaries went up over 30% in 2011, and the increase in 2012 is expected to exceed 11%. In Guangdong, for example, minimum wage is set to increase by at least 15% through 2015. Industrial land costs in China also have been on the rise. The natural result of this is that suppliers (and customers) are looking for cheaper markets to outsource their lower-value manufacturing.
Can China continue to survive as the world’s workplace?