subject: The Real Costs of Manufacturing in China? [print this page] The True Cost of China Manufacturing By: Aaron Xu January 07, 2010 Weve all heard the story before about the real cost of manufacturing in China, the opportunity to drastically reduce your costs, China turnkey manufacturing, etc. But before we get into the various factors that impacts Chinas manufacturing costs, lets put some facts into full perspective. With a labor force of more than 900 million strong, Chinese workers remain among the lowest paid in the world. The average total labor remuneration for a Chinese manufacturing worker is 65 cents per hour, with many willing to accept wages for far less. This is an average wage that includes all the benefits (pension, medical, unemployment and housing). China manufacturers work an average 50 hours per week, while many also choose to work through the weekends or even holidays without the benefit of a doubled hourly rate. Working at such intensity, average Chinese labor workers annual income is roughly around $1,500 dollars; many migrant workers from the country sides make less than that. What a Chinese factory worker earns is roughly about 5% that of an American. Keep in mind that Chinas low labor cost are reflected in every position, from office workers, cargo handling to truck driver. Chinese factories are constantly re-investing, improving capacity, quality and becoming more innovative. To make a point, 90% of U.S. manufacturing plants were constructed a decade ago, while that number is only 40% in China. Sixty percent of Chinese companies cited innovation as their top priority, while in the United States, only a quarter. This is only a few of the factors that allow Chinese manufacturers to produce at such a low cost. If we take into consideration other factors such as costs of raw materials, logistics, storage, delays and etc., Chinese manufacturers can produce labor intensive products at 30% to 50% less than American, European or Australian companies. These cost cutting methods are not guaranteed for all companies across all industries, and language barriers might hinder the communication process. Even with these risks considered, choosing to source from China is more than just a short-term cost cutting strategy. These are manageable and preventable risks, and sourcing from China is a great way to test the waters and a starting point to build your China network. What more, you can turn this opportunity into assessing a new potential market. With all things considered, Chinas total manufacturing costs is on the raise thanks to increase in logistics, wage, and inflation. But China will not lose its manufacturing attractiveness anytime soon. Please feel free to leave your thoughts and comments. For more information on sourcing in China, please visit our website at http://www.csandcm.com/. We are professionals that will help you in every step of the way when sourcing in China.
The Real Costs of Manufacturing in China?
By: Aaron Xu
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