As has been observed several times in this column, the rapid development of the Chinese economy leads to a parallel growth in wages, and even if these still remain far below those of the West, the gap is eroding. Many European and American companies that have relocated to China, in whole or in part, are beginning to wonder whether it is not necessary to relocate again, to other Asian countries where labor costs are lower than those in China.
Over the weekend, Deputy Foreign Trade Minister Wang Chao noted at a conference in Changsha, Hunan province, that China is losing many export orders to other emerging countries. For example, it happens that importers purchase fabrics and linings in China and then proceed with the packaging in Vietnam where, in addition to having lower labor costs, they also enjoy duty-free access to the US market.
The government, Wang Chao said, is reacting with tax incentives and measures aimed at easing transport costs (making it easier for central regions to compete with coastal regions for exports). In the first 4 months of 2012, Japanese imports of fabrics and clothing from China slowed down sharply, to 7% on the year, while imports of the same products from other developing countries grew by 40 percent and more . The strategy of both Japanese and Western importers has been called 'China plus one'. While keeping China among the major suppliers, at least one other source is being sought, keeping the foot in both sides, since the "other source" needs to be tested.
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