SAVANNAH, Ga. -- China is entering the beginning of the end of a 25-year era of developing its exports, and its leaders are preparing to shift to a more balanced economy and the growth of its domestic consumer market over the next 20-25 months, said M.K. Wong, director of reefer trade for Orient Overseas Container Line.
Wong on Wednesday told the opening session of the 4th Annual East Coast Maritime Conference sponsored by The Journal of Commerce that this shift will inevitably drive up labor costs in China. A new labor law that took effect Jan. 1 makes overtime pay mandatory, requires labor contracts for workers who have worked for 10 years and calls for severance, he said.
As a result many companies are beginning to seek alternate production locations, according to speakers on another panel.
Some companies are looking to relocate production from China to Eastern Europe or to Latin America, where they can be closer to their markets, said Isabelle Vermeersch, president of Centipid, a consultant based in Westport, Conn.
But before they decide to shift production, they should consider all the costs associated with relocation, including currency issues, logistics costs, port congestion, infrastructure conditions, and language requirements in addition to labor costs, she said. When all these costs are considered, China may remain the more economical source of production.
Michael Rizner, global supply chain manager of Augusta Sportswear, said his company has been exploring alternate sourcing locations to China. It has not decided where to locate production because it is factoring all the costs of another location. That includes evaluating economic and political stability; environmental considerations; availability of skilled labor; product quality, and language barriers, he said.