Less Competitive. More Expensive.

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A new report (via China Daily) notes that China is becoming less competitive:

    “China has slipped six places to 54th in the *World Economic Forum’s (WEF) global competitiveness rankings”.

The report notes problems such as weakness in the banking sector, low penetration of technologies (such as the internet and PCs), challenges for mass education, and environmental problems.

The paper also notes the International Institution for Management Development’s report in May and said that that “China’s global competitiveness rose from last year’s 31st place to 19th this year”. So, everyone has different perspectives on these issues, and China is big and complex enough to provide different answers for different people, in different sectors (and with different agendas), at different times. However, a report in the FT (following up earlier news on Li and Fung’s move away from China sourcing) does indicate that in the manufacturing sector, prices are going up – mostly by less than 10 percent:

    “Almost three-quarters of China-based manufacturers will raise their export prices over the next year, according to a wide-ranging survey released this month by Global Sources, the Hong Kong-based trade show organiser and publisher.”

It seems that the “profit squeeze” I reported on back in May is starting to bite. No doubt this news will cause more companies to look further west, at cheaper sources of production. It may also make some local firms renew their focus on increasing value-added content, in line with recent government policies .

*PS Check out the World Economic Forum China Business Summit Blog.

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