Caution! China ahead!
August 5, 2006 by SwizStick
Filed under Education, QuickNews, Supply Chain Management
The audience did not want to hear negative, derogatory, or dismissive talk about the booming China economy. The listeners were the supply chain counterparts of religious evangelists; nothing could counter their almost mystical faith in the Chinese economy’s limitless power and growth.
Certainly, there is much to admire about China. Within a few generations, it has transformed itself from a primarily rural nation into an economic colossus — a feat unparalleled in modern times. Warning signs, however, point to an economy that is turning from white-hot to red-hot to red.
This post from BlogOnLog is yet another example that sourcing from China may have peaked, yet it seems from the audience he was dealing with that no one wants to believe it – yet. There have been an increasing number of articles and commentary regarding China’s mounting problems, including from this blog, that have repeatedly cautioned companies to think carefully before going into China or sourcing from there. Despite this caution, business continues to pour into China with too many companies failing to diligently plan and assess carefully the costs and risks involved.
BlogOnLog’s post serves as more of a cautionary tale for China’s enormous manufacturing industry, citing a number of warning signs and examples that China would do well to heed:
China is not immune to the “maquiladora syndrome.” Maquiladora plants sprung up about 30 years ago along the U.S.-Mexico border to produce a wide range of low-cost components and finished products for the American market. For a number of years, these factories flourished, with laborers often working 24-hour shifts.
Then came the great sucking sound from China. U.S. manufacturers, always looking out for new, cheap production sources, moved en masse to China. Today, many of the maquiladora plants are closed; some 75,000 Mexican workers living in border cities either lost their jobs or are working part-time shifts. How many have crossed the border to find work in the US? Many of the communities are ghost towns now.
This is a sobering post for Chinese manufacturing as well as yet more cautionary advice for companies rushing to source from China. Again, I am not saying that companies should not source from China, only that they need to plan very carefully and weigh all the risks and costs involved. Make sure you have the complete picture before deciding to go into China.
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