Moving Away From China to Become a Trend? I Don’t Think So

Thursday, July 14, 2011 10:17

Back in 2008 when the price of nearly everything in China was at a record high, discussions surrounding moves away from China were taking place. Vietnam was being tapped as the “next” market, and a few stories began popping up in the US media of firms returning home.

And with China posting some serious inflationary gains over the last 18 months (6.5% in the last quarter alone), it goes without saying that some of those discussions of “where to next” are beginning to pop up again.

One article that I was just passed “Salem clothing firm moving back from China” offers a brief glimpse into one company who has made the decision to pull the plug on China and go home because of inflation and quality control issues:

An Oregon apparel company cites inflation and quality control problems as two of the reasons it’s moving its manufacturing out of China and back to the United States.

Nine 1 One Gear of Portland previously had its line of outerwear for firefighters and emergency responders made in China. Now it will rely on skilled workers in Salem.

For me this article serves as a good example of a firm who, if they so chose, would and could move away from China quite easily… with the proper plan… but that they in no way should serve as “the” for any trend..

That as they have been outsourcing the work to suppliers in China (i.e. they don’t own the factory), their model is built for dynamic movements (across suppliers… perhaps geographies). Which makes pulling up stakes much easier.

Second to that , the article references issues of quality control and inability to find suppliers willing to work with on their terms. Which to me are perhaps the more compelling reasons for why a firm would want to look to other sources, or bring back in-house.

So, at this time I would say that China still retains hold of its title as manufacturer of the world’s goods (even with additional inflation guaranteed), but that there are going to be moves away from China as firms look to find better quality in craftsmanship… or find that China is not a market for their products after all.

That being said, a friend of mine in HK recently made a very compelling argument for Indonesia as the next China. Good infrastructure with a large domestic consumer market. Not willing to say that it could replace China, but perhaps Indonesia’s market size could justify an investment that compliments a China investment.

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