Executive Briefings

How Will China's Coming Labor Shortage Affect Supply Chains?

Not too long ago, the mere mention of the "China price" could send shivers down the spines of executives in developing countries trying to compete for outsourcing contracts. A pending labor shortage could make such pricing an historical relic.

Typically, Western multinationals would demand the lowest price possible, which in reality was benchmarked by the ultra-low prices they could get from Chinese producers. And other developing countries eager to break into the global supply chain had no choice but to go along.

But dramatic changes in China's demography, specifically the rapid decline of its labor supply in the coming two decades, will make the "China price" a thing of the past.

Based on China's fertility rate and population growth, a recent study by two economists at the International Monetary Fund suggests that, without any changes in policy or the birth rate, China will begin to experience a labor shortage in about a decade. In fact, by 2025, the country could face a shortfall of 28 million workers.

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Keywords: international trade, supply chain management supply chain jobs, China workforce shortage, China's population control, workforce and supply chain

Typically, Western multinationals would demand the lowest price possible, which in reality was benchmarked by the ultra-low prices they could get from Chinese producers. And other developing countries eager to break into the global supply chain had no choice but to go along.

But dramatic changes in China's demography, specifically the rapid decline of its labor supply in the coming two decades, will make the "China price" a thing of the past.

Based on China's fertility rate and population growth, a recent study by two economists at the International Monetary Fund suggests that, without any changes in policy or the birth rate, China will begin to experience a labor shortage in about a decade. In fact, by 2025, the country could face a shortfall of 28 million workers.

Read Full Article

Keywords: international trade, supply chain management supply chain jobs, China workforce shortage, China's population control, workforce and supply chain