Friday, December 15, 2017

Investment News and Commentary from Emerging Markets in Asia - China, India and ASEAN

About discusses business and investment news rising from the geopolitical relations of China and India, and the interactions these two countries have with the rest of emerging Asia.

Will China lose its cost advantage to Vietnam, Cambodia and Sri Lanka?

A tailor displays fabrics in Beijing’s Cental Business District.

Alarm bells are definitely ringing in boardrooms across China.

Eating into exporters’ profit margins, producer prices jumped 6.1 percent last month to a three-year high.Meanwhile, labour wages last year rose 20 percent and the yuan has appreciated more than nine percent against the US dollar in the past 14 months.

This has meant that more exporters face bankruptcy unless they lift prices to salvage their disappearing margins, which is just what most plan to do.

According to a survey by brokerage and research firm CLSA, 80 percent of Chinese exporters intend to raise prices this year in response to higher raw material costs.
“The appreciation of the renminbi (yuan) against the US dollar is a secondary factor driving these price hikes,” Shanghai-based CLSA economist Andy Rothman said in the survey.

read more here:

Does this mean that China is finally moving up the value added chain?, will it create more opportunity in the area for Vietnam, Cambodia, Sri Lanka and Burma in the low cost manufacturing space? Or will this erode China’s edge as a low cost manufacturer the world depended on for cheap goods, giving rise to India’s dominance as a quality supplier?

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2 Responses to Will China lose its cost advantage to Vietnam, Cambodia and Sri Lanka?

  1. Rajiv Sanjay says:

    Its a bit of both. China intends moving up the value chain and is driving certain businesses out as has been mentioned by you many times before. They are moving to Vietnam, India and a few inland in China, mainly to Fujian. Also, other countries are competing and offer valid and quite superb opportunities for exporters and for sales, especially Vietnam and Chennai (export) and Mumbai, Kolkata (sales opportunities to a new market). This is also extending as you mention to other Asia countries, even North Korea! Cambodia is seeing spill off from Vietnam and will also take advantage of the Hanoi / Yunnan free trade agreement between Vietnam & China. China is now only one option and the global manufacturers have woken up to this now. This site at 2point6billion is extremely timely. Its about Asia now, not just China. Oh, and well done to Dezshira on their new offices!


  2. Nazia Vasi says:

    Thank you very much Rajiv!! Dezanshira, like many manufacturers is spreading its wings too, and very soon we will have a pan-asia presence.

    China is no longer the only option for manufacturers, opportunities have been spilling over China’s borders and her neighbors are prospering. Take for example Vietnam, now a member of the WTO, moving rapidly from communism to capitalism, Vietnam’s learning fast from China & India’s mistakes. At 8.4% GDP growth, its now the second fastest growing economy after China, she exports nine times as much to America as she imports from America.

    Simultaneously, Vietnam is also going through the same transformations as India and China went through in the last decade – Taiwanese, Singaporean, Korean, Chinese & American companies are pouring in billions, overseas Vietnamese are returning with fluent English and american entreprenural skills, and multinationals are already feeling the brunt of a lack of skilled labour, as a result salaries are sky rocketing 50% a year.

    Further, Vietnam produces and uses more cement than France, its former colonial ruler, both Ho Chi Minh city and Hanoi’s stock markets have more than doubled in a year and although crippled with corruption, infrastructure is going the Chinese way. With a two child policy, Vietnam has ensured that they will have a sufficient consumer base in the furtur, while not suffering from population problems like India, or China’s little emperors.

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