Manufacturers Are Leaving China

[ChineseTiger1986]

That's the unions doing that. But that's O.K. Well sell you guys cheap cars that will be good for you guys but wouldn't be street legal in civilized countries.

Just calm down a little bit, i see that you have already posted 3 topics once straightly about China, and you need to take a break.

 

[liall]

Hasn't ICE rounded you up yet ? They'll be hitting the massage parlor you call home soon, Mr. HappyEnding.



It's about time those slackers did something. With all the people they have, all the stealing they've done and for how long they've been around, they are long overdue.

dude consider this China was poor as fuk till 60s and even 70s. look at them now they done so much so fast. besides if china develops chinese immigrants will drop which is a good thing for west i guess

 

[Missile]

Good luck Mexico with a King Company. Rest of us are staying here in china because we need Asia Pivot. Mostly Americans are still hoping that they will get back their jobs but ,sorry to say, not anytime soon. Till then join the Army.

 

[terranMarine]

The American is 57 yrs old,, he will get to live long enough to see China overtaking the US soon despite repeatedly posting news articles of China's collapse.

 

[boomslang]

The American is 57 yrs old,, he will get to live long enough to see China overtaking the US soon despite repeatedly posting news articles of China's collapse.

53.

 

[cnleio]

When BOSS can not pay for satisfactory salary to the employee, Manufacturer need cost down and the capital going to cheaper place.

 

[Fukuoka]

In Mexico there are gangs that don't exist in Asia

Why not going in Thailand, Combodia, Laos, Vietnam?

 

[shuttler]

China is moving up on the industrial development echelon. Some industries have to go but not completely as we have a 1.36 billion consumers who want these low tech products and the western part of China is still capable of offering equivalent wages as competitive as vietcongs et al.

I wonder what pollutes their air? Probably low quality fuel used by sub-par transportation vehicles, burning of biological waste, and burning of coal which makes up over 50% of India's energy mix.

I think these are the bulk of the pollutions
They have so many of these cars running around the streets which are not meeting emission standards
and no offence, cows which give off a lot of methane

Credit: .telegraph

 

[xunzi]

Our American friends are sore loser and always cry like a little bitch that we steal their jobs. LOL Look, it is inevitable that we are moving away from low-value manufacturing to high-value manufacturing. As our currency raise, labor wage increase, and education strengthen, more people will have higher income and better education. With the new wealth, people will demand entertainment value, so the service sector will expand 10 folds from now. Those with engineering degree will go into high-value manufacturing sector to manage machinery and those with business and social science degree will go into the service sector. This is why we will beat the US. Our culture of Confucianism that value education more than the US hip-pop culture means we will never run out of talent and educated people to fill those void in both service and high-value manufacturing sector. However it doesn't mean we will not producing low-value items altogether. It will convert into robotic automation and those low-value will mostly consume by ourselves to bring down inflation cost. The high-labor intensive, low manufacturing job, or what our American friends love to call "slave job" will go to India, Vietnam, and Mexico. Congratulation! LOL.

 

[Snomannen]

Good, give us back our fresh air and clean water.

 

[senheiser]

funny how the mexican economy lies in shambles now if this is true

 

[ephone]

Anyone predicting China collapses again???

Manufacturers Are Leaving China, But Where Are They Headed?
Tue, 01/28/2014 - 10:59am
Tia Nowack, Associate Editor, Industrial Maintenance & Plant Operation


Seeing China’s manufacturing sector shrink is a trend that excites Americans, although it may not actually alleviate much of the pressure around a U.S. unemployment rate of 7.3 percent. The reality, according to many experts, is that the phenomenon is more one of nearshoring than reshoring, as many of these businesses — along with their jobs — head to Mexico.

The competitiveness of offshoring has been declining for years, as China has faced increasing wages and currency costs, as well as higher fuel and transportation costs. There are also many hidden costs and risks that are difficult to anticipate. According to Jason King, Vice President of global business firm AlixPartners, “companies are waking up to the harsh reality that manufacturing offshore in places like China and other low-cost countries is costlier than it initially looked.”

In fact, by some estimates, manufacturing in China will cost as much as manufacturing in the U.S. as soon as 2015.


Why Mexico?
Unlike China, Mexico continues to boast low labor costs and has a huge advantage in terms of proximity to the American market. That said, finding out how many American companies are manufacturing in Mexico is surprisingly difficult. According to Mario Vidana, Senior Trade Specialist with the U.S. Department of Commerce, there are no public directories for Foreign Direct Investment (FDI) companies established in Mexico. In order to obtain this information, you would need to contact the chamber of commerce or industry chamber in each state. Vidana also warned that they are often reluctant to share this information.

So while the exact number of U.S. companies that are relocating their factories to Mexico is unknown, it does appear that the trend is especially apparent in the automotive, aerospace, and textile industries. In an interview with Entrada Group, King points to several key benefits of producing in Mexico compared to China. These benefits include lower transportation and warehousing costs, an improved ability to respond to customer demands, a better control of intellectual property, the ease of proximate time zones between management and production, and the cultural similarities between the U.S. and Mexican markets.

Paula Ramos, Marketing Director at MFI International, echoes many of these advantages, the greatest being the proximity to American markets. MFI International provides manufacturing services in the Juarez, Mexico region that ease collaboration between U.S. companies and Mexican manufacturers. She specifically cites the benefits of working in the border region of Mexico, where there are concentrations of skilled workers and industry.
“You get the benefits from the lower labor rates in Mexico, and you can have your products within the same day. We have cases where we can place an order in the morning and the product comes back to an El Paso facility that afternoon,” Ramos says. “It’s almost like being in the U.S.”

To Ramos, this quick turnaround is what defines nearshoring. “I talk to companies that say ‘nearshoring’ and then mention factories in Columbia and Central America — that’s still far.”

According to Ramos, manufacturing in Mexico is being developed in “clusters” which are often incentivized by the Mexican government. The skilled workforce is available throughout Mexico, and different cities are working to attract different types of investments. Nissan, for example, recently opened a plant in Aguascalientes, which will attract suppliers and OEMs to that region. There are a large number of automotive and aerospace companies moving south, which is building up new clusters, she says.

Smart Investments and Contentious Plans

The Mexican government is incentivizing manufacturing on Mexican soil by making wise investments, according to Ramos. The government is primarily financing improvements to national infrastructure and roads to ease the flow of trade. They have also worked for years on building trade agreements globally, and now hold agreements with 44 countries that allow duty-free trade, she says.

The government has also invested in the education of its people, turning out a prepared, bilingual workforce. According to the United States Embassy in Mexico, more Mexicans — almost 100,000 more — earn engineering degrees annually than Canadians and Germans. These skills are attractive to U.S. companies, especially for a lower price tag than at home.

While the Mexican government has made some smart investments, not all of their recent decisions are going over well with manufacturers. On November 1, Mexico’s congress passed a tax reform measure that will make changes to customs practices and raise the value-added tax (VAT) on export assembly plants in the border regions.

Ramos says that MFI is waiting until the end of the year to see what the final resolution is before making a formal statement, but compares the contentious proposal to health care reform in America.

Currently, a major benefit of producing in Mexico versus in China is avoiding a high VAT. As the system stands now, companies import materials duty free, transform those materials into a product in Mexico, and export the finished product back to the U.S. with zero, or very few, duties. The new VAT would change the way taxes are calculated, and the manufacturing (Maquiladora) industry is lobbying very hard against it.

Another concern that has deterred some companies from manufacturing in Mexico is the ongoing, publicized, drug related violence. Ramos said that this fear is not particularly relevant to manufacturers because of the nature and location of the violence. In Mexico, most manufacturing is done in industrial parks that are gated and secured. “Most manufacturers, like MFI, will arrange transportation for workers from their living areas to and from their workplace,” she says.

What Does This Mean For American Manufacturing?

Ramos says the decision to manufacture in the U.S. or Mexico should be based on the type of product a company manufactures. To Ramos, “reshore products” have lower labor requirements and involve a more automated type of manufacturing. On the other hand, “nearshore products” have higher labor requirements, involve more manual operations, and allow a company to compare labor costs between China and Mexico.

“I strongly believe North American companies should take advantage of nearshoring labor-intensive operations by establishing production sharing between the U.S., Canada, and Mexico, and boosting economic activity within the region,” she says.

As Ramos explains, forty percent of Mexico’s exports to the United States consist of components made in the United States, primarily for the automotive industry. In China, that number drops to less than eight percent. By that logic, increasing Mexico’s manufacturing industry directly stimulates manufacturing jobs in the U.S. In turn, creating jobs in Mexico stimulates the Mexican economy, which increases Mexican imports from the United States.

And for Ramos, this is the best part of her job.

“It feels very good, when you start talking to a company and explaining all of the benefits [of producing in Mexico], and then you walk out on the production floor and you see us hiring more and more workers,” she says proudly.

“It’s really about keeping the workers happy, and if you’re doing that by helping companies save some money and become more competitive, that’s a great match.”

 

[Raphael]

The Western media is on a campaign to promote Mexico that is really insane - it's completely detached from what figures coming from that country are showing. Mexican industrial production has been on negative territory since early 2013 - precisely when the Western propaganda machine about that country began working. I didn't know there could be an industrial exodus to a country that resulted in said country's industrial production slowing down; has anyone more knowledgeable ever heard of that? Or is it that no such process is occurring and the US media - rather predictably, I must say - is promoting a country only so it can lend credibility to its unpopular government as it implements anti-nationalist policies to benefit US "investors"?

I think OP's article has a point, but I strongly agree with this assessment of Mexico. Mexico is an absolute hellhole cesspool, it's run by drug cartels, people get beheaded on the street, foreign businesses have no confidence investing in Mexico, and the USA, especially the CIA, has only been trying their best to inflame the violence by offering selective support to their favored cartels to keep Mexico is a state of disarray. If Mexico is so promising, why did American manufacturing cross an ocean in the 90's to set up shop in China, instead of going next door and taking advantage of the new NAFTA trade agreement? This was when Mexico's situation was far more stable than it is now.

The manufacturing that China shed will most likely go to SEA.

 

[KingMamba]

What about the drug violence and killings in Mexico? Its not getting any better any time soon. Juarez is particularly bad.

China is moving up the value chain, it happened with all fast developing East Asian countries, Japan, South Korea and now China. So it is natural that cheap labor industries will move.

Only border regions are run by cartels if you go into interior Mexico there is much calm, in fact the tourism industry is a big source of income for Mexico.

I think OP's article has a point, but I strongly agree with this assessment of Mexico. Mexico is an absolute hellhole cesspool, it's run by drug cartels, people get beheaded on the street, foreign businesses have no confidence investing in Mexico, and the USA, especially the CIA, has only been trying their best to inflame the violence by offering selective support to their favored cartels to keep Mexico is a state of disarray. If Mexico is so promising, why did American manufacturing cross an ocean in the 90's to set up shop in China, instead of going next door and taking advantage of the new NAFTA trade agreement? This was when Mexico's situation was far more stable than it is now.

The manufacturing that China shed will most likely go to SEA.

Cheaper wages were in China simple mathematics involved which made them go to China, as Chinese wages rise they will go elsewhere.

 

[Raphael]

Cheaper wages were in China simple mathematics involved which made them go to China, as Chinese wages rise they will go elsewhere.

OP's article was being very disingenuous when it trotted out this line and refused to offer any exact figures, because the reality is that China's wages are still lower than Mexico's. Mexico's GDP/capita: 10600, while China's: 6700.