A recent story by Frank Langfitton on NPR’s “All Things Considered” reported that rising costs and shifts in Chinese government policy are actually forcing hundreds of smaller Chinese factories to close. According to the story, profit margins are disappearing as a result of the rising Chinese currency value, which has forced manufacturers to move their operations to lower cost countries such as Vietnam.
The story reports that China’s government wants to encourage higher-tech manufacturing, so it is taking away the incentives it used to give to cheap goods manufacturers such as no taxes and cheap rent. China wants to follow the same path as its fellow Asian countries such as Japan and Taiwan, whose products eventually progressed from low-tech to high-tech. This movement to more sophisticated types of production has created the same obstacle for Chinese companies that challenges U.S. companies – finding skilled labor.
Familiar patterns aren’t they.