Executive Briefings

Isn't China Too Expensive for Manufacturers Now?

Labor shortages, wage inflation, rising taxes and Renminbi appreciation drive some to conclude that China's heyday is over. Critics point to surging economic growth that has led to 15 percent nominal wage increases for the past few years. In addition, recent legislation aimed at protecting workers' rights has boosted the costs of labor. Adding further pressure, the Chinese government is decreasing or eliminating export rebates for a broad range of labor intensive or environmentally unfriendly products and phasing out tax incentives for foreign investment. Meanwhile, the Renminbi has gained more than 20 percent on the dollar since 2005. Despite these seemingly negative factors, the vast majority of corporations plan to increase investment in China. Why?
Source: Industry Week

Labor shortages, wage inflation, rising taxes and Renminbi appreciation drive some to conclude that China's heyday is over. Critics point to surging economic growth that has led to 15 percent nominal wage increases for the past few years. In addition, recent legislation aimed at protecting workers' rights has boosted the costs of labor. Adding further pressure, the Chinese government is decreasing or eliminating export rebates for a broad range of labor intensive or environmentally unfriendly products and phasing out tax incentives for foreign investment. Meanwhile, the Renminbi has gained more than 20 percent on the dollar since 2005. Despite these seemingly negative factors, the vast majority of corporations plan to increase investment in China. Why?
Source: Industry Week