India poised to reap rewards of move away from China

24 January 2011
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24 January 2011 | Angeline Albert

India is the favourite to benefit from the shift in sourcing strategy away from China, a survey of 385 buyers has revealed.

Some 57 per cent of buyers of China products, who expect to increase sourcing in other countries, are planning to boost imports from India, a survey by Global Sources found.

The change is the result of increased export prices in China, which has been driven by escalating costs and a stronger yuan. More than two-thirds of buyers said the yuan's appreciation had swayed their sourcing decisions.

The survey, conducted last month, was mainly of EU and US buyers and covered industries including electronics, home products, clothing and hardware.

Export prices of some products in China are much higher than in India because of inexpensive operating costs said Chris Devonshire-Ellis, founding partner of consultancy Dezan Shira & Associates.

He compared the basic expenses of a factory in Dongguan, Guangdong province, with those of a similar plant in Chennai, southeast India. He found spending on salaries, benefits and rent in Dongguan to be seven times higher.

Other favoured sourcing alternatives include Vietnam, Thailand and Malaysia.

The survey confirms that Vietnam continues to emerge as a viable alternative to China, with 31 per cent of buyers planning to increase procurement in the country.

China's textiles suppliers have been losing orders of basic items to Vietnam,  because Vietnam-made clothes can be as much as 30 per cent cheaper, with salaries there around three-fifths of those in China.  

Meanwhile, 30 per cent of survey respondents said they planned to increase sourcing from Thailand.

The survey results also reveal 7 per cent of buyers are considering increasing imports from countries that have higher production costs than China, including South Korea, Japan, the US and the EU.

Global Sources expects China's exporters will see fewer orders for low-end products in the months ahead.

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