Businesses face China conundrum

6 January 2005
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06 January 2005 | Cara Whitehouse

Cheap labour costs in China are providing some of the greatest opportunities but also the most significant threats for UK manufacturers, according to a recent survey by manufacturers' organisation, EEF.

Where Now for Manufacturing?, which polled almost 500 engineering and manufacturing companies across the country, found that investment in and outsourcing to China had almost doubled since 2002.

Thirteen per cent of respondents now locate their main overseas production in the country because of the greatly reduced labour costs.

But almost half of respondents ranked China as their biggest competitive threat.

A spokesman for EEF told SM: "China is no longer simply the workshop of the world, producing cheap plastic products. Its goods are increasingly sophisticated and are made using substantially lower labour costs."

This offered low-cost manufacturing opportunities for UK businesses, but equally created huge competition for them.

Of the companies that had already outsourced, three-quarters said the need to reduce labour costs was one of the key drivers for investment abroad.

According to data quoted from the United Nations Industrial Development Organisation, annual manufacturing wages in the UK were around $30,000 in 2000, compared with less than $1,500 in China, India and other parts of Asia.

Over 90 per cent of firms with an interest in outsourcing operations to China said they planned to increase production there in the next five years.


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