Chasing Cheaper Labor

The southern coastal regions of China are home to manufacturers that make many of the items that are exported to the US (and the world).  Many are technological companies that have set up facilities to take advantage of cheap Chinese labor rates.

I have written about the inevitable change facing China – their exports will be demanded by their own population instead of being shipped to the rest of the world.

Further evidence of this continued transformation was reported in a Financial Times article earlier this month.

Foxconn Technology, a contract electronics manufacturer (chief source of many Apple products, among many other companies), employees one million – one million – people in China, with half a million employed in Shenzhen.

Foxconn plan to move 300,000 jobs to new facilities under construction in interior Chinese provinces where the labor rates have yet to rise, to avoid the steadily increasing labor costs in locations such as Shenzhen.

The fact that these new facilities are already under construction is an indication that the need to find cheaper labor was a strategic decision made some time ago.

This begs the question: which will happen faster – the spread of Chinese workers’ demands for better pay and conditions, or the shift of Chinese manufacturing to cheaper provinces.

I’m betting on the workers.  The genie is out of the bottle – the internet genie.  450 Million Chinese have internet access, and the more Chinese who have it, the more they will clamor to have what they don’t.

I think Foxconn and other similar Chinese manufacturers will run out of cheap Chinese labor sooner than later; then what will they do?

I think we – the US – must be prepared to make more of the things we need.  This is a huge opportunity for us, and one of the main causes of our coming Industrial Renaissance.

Photo: Southern Weekend