Experience Not Logic has a nice post, entitled, “China’s Manufacturing Competitiveness Is at Risk”: Sort Of,” on the recently published Booz Allen/AmCham Manufacturing Competitiveness report, somewhat wrongly titled, “New Challenges for Foreign Producers: ‘China’s Manufacturing Competitiveness Is at Risk.” This report affirms what I said previously in my first post in this series:

My own unscientific sampling reveals that in most sectors of manufacturing, Vietnam’s manufacturing capabilities are just not there yet. I have asked around ten of my firm’s manufacturing clients and five or six manufacturing/product sourcing consultants where Vietnam fits in the manufacturing picture. All the manufacturers said Vietnam is not ready to manufacture their product and all the consultants said something along the lines of, “clothing and rubber duckies, yes. Much more than that, no.” This is not to say big companies like Intel will not be establishing their own manufacturing operations in Vietnam, but it does say we should not expect a wholesale transfer of manufacturing from China to Vietnam in anything approaching the near term.
Manufacturing outsourcing to both Vietnam and to China will continue increasing. Obviously, there will be many companies that choose Vietnam for their manufacturing who would have chosen China a few years ago. There will also be many who are in China now who will choose to expand their manufacturing operations in Vietnam instead of China. But China will remain the overwhelming choice for manufacturing and few companies manufacturing in China now will up and leave for Vietnam. Vietnam is not a panacea and it is not a replacement for China. Not even close.

Experience Not Logic cites a recent Knowledge@Wharton article, “New Challenges for Foreign Producers: ‘China’s Manufacturing Competitiveness Is at Risk” concurring with my rubber ducky conclusion:

K@W summarizes the [Booz Allen/AmCham] report and conducts its own research to discover that China’s manufacturing sector is still strong and that we should only expect a decline in the competitiveness of the “high labor, low value-added area” (read: basic cheap stuff).
K@W notes that it is only the low-value added companies that are moving out of China because the profit margins that these companies operate under are slim enough that they will see a significant gain by moving to India, Vietnam, Thailand, Malaysia or Brazil. And, these firms that are leaving are largely Taiwanese and Hong Kong companies that first opened factories in China back “in the late 1980s and early 1990s.” They set the trend with moving into China, and they are setting the trend in moving out of China.
K@W notes that high-value-added manufacturers, such as heavy harbor equipment manufacturers, have plenty of room for profit growth in China because there are many compelling reasons to keep factories in China:

China is still the right manufacturing choice for most American and European companies, most of the time. What do you think?

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Dan Harris

I am a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

I mostly represent companies doing business in emerging market countries. It has taken me many years to build my network and it takes constant communication and travel to maintain it. My work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

I was named as one of only three Washington State Amazing Lawyers in International Law, I am AV rated by Martindale-Hubbell Law Directory (its highest rating), I am rated 10.0 by AVVO.com (its highest rating), and I am a SuperLawyer.

I am a frequent writer and public speaker on doing business in Asia and I constantly travel between the United States and Asia. I most commonly speak on China law issues and I am the lead writer of the award winning China Law Blog (www.chinalawblog.com). Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed me regarding various aspects of my international law practice.

I am licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at my firm, I focus on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.