by Keith Carruthers MBA, SCMP

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Saturday, June 12, 2010

Is China Losing Ground?

Over the past couple of decades, China has been extremely successful in becoming a major economic force globally, and has in effect long since established themselves as the "world's manufacturers". In fact, it often seems difficult to find products in retail stores throughout North America and the rest of the world that is not Made In China.

For those of you who may have had the pleasure of travelling to China over the past decade or so, you can't help but notice the overwhelming changes in the country. These changes are obvious when looking at the vast infrastructure improvements, the number of cars, and the increase in the standard of living of many of the China's residents.

Are these changes a cause for concern for the business community in China?

History has shown many examples of countries who have eventually lost their global competitiveness through increased labour costs related to increased standard of living for the country's workforce.

In my time travelling to China, I have seen hotel costs escalate from the $70 - $80 USD level, to well in excess of $200 per night for the 5 star North America branded hotels. Similar price escalation can be seen in many other products. Is this a sign that China is pricing themselves out of the global manufacturing marketplace?

I have been posing these questions to my network of vendors throughout China for some time now, and they all feel that China will never price themselves out of the market. I can't help but think, however, that other countries that were once much more competitive thought the same thing.

Whether or not China is on the path to playing a less significant role in the world's supply chain remains to be seen. One thing is clear, however. Like other areas of business such as research and development, product innovation, and consumer purchasing trends, those who have the foresight or "vision" of where the global sourcing community will end up, will be the "first in" to new sourcing markets, and will be the big winners from a competitive advantage in the marketplace point of view.

The question is, "Is it time for companies to change their strategic sourcing focus", and if so, "Who will be the next China"?

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