CHINA IS NOW THE HUB OF GLOBAL SUPPLY CHAIN

Data of International Labour Organization shows that average wages in China had been doubled since 2006. Cheap labours, China's most traditional advantage in attracting cost-sensitive companies, have become less attractive. The stereotype of China being the "world's factory" is now changing due to the increase of wages.

"Hub of the global supply chain"

China, as the world's second largest economic body after the US, imports a great amount of raw materials (such as microchips) and parts and processes them into popular products that sold worldwide, reported the Wall Street Journal. For years, the boom of imports and exports has made China one of the most important export destinations.

Barbie, one of Mattel Incorporated's products, is now produced in China. (Photo : Getty Images)

For a very long time, global companies have been outsourcing manpower and manufacturing operations to China due to its cheap labour costs. However, salaries of Chinese private sector have been increasing in recent years and the country is becoming a hub of the global supply chain, according to a recent survey conducted by Britain Market research institution, MARKIT.

How will Chinese factories respond?

China has top-notch infrastructure, a skilled workforce, and factories that thrive on process innovation -- the ability to rethink how products are assembled to maximize efficiency and flexibility.

They're embedded in the vast supply chain known as Factory Asia, which means they can smoothly synthesize components and raw material from around the world and quickly respond to the various tastes of global consumers.

"The global supply chain is in China now. If an American factory evacuates from China, it will break down the whole supply chain, which will be a disaster to the American enterprise," a researcher from Peterson Institute for International Economics says.

Increasingly, Chinese factories are moving from assembly work to higher-value pursuits, such as engineering, design and branding. Outbound direct investment surged by 44 percent last year as Chinese firms acquired technology companies overseas.

As the hub of world's manufacturing centre, new techniques will be developed by China. These are the key factors of a promoting manufacturing industry.

Source: www.bloomberg.com