The Opportunity for China Manufacturing to Move to Remote Countries
"Ethiopia – In the past, she was the synonym of poor. Today, is she the gem to be pondered in view of the China manufacturing development?"
After Mainland China’s reformation and opening to the outside world, manufacturing industries
have gone through more than 30 years of golden age. The label of “made in China” is still gaining the world's recognition by its cheap price and good quality, becoming one of the main pillars of China's rising. However, as we all know, China's manufacturing industry is facing problems like a rise in labor cost, in raw materials price and high land rent, leading the growth rate of this “world factory” declines. Facing the upcoming difficulties and challenges, a lot of scholars and experts suggest that the China's manufacturing industry needs to be upgraded, transformed and innovative. But to some manufacturers who have abundant capital and newest technology, all they need is to find a vast land with sufficient resources and low cost to let them focus and continue their production.
To suspend the pressure of rising cost, many manufacturers “shift inside” their factories to the north-west part of China, or “relocate” them to Southeast Asian countries like Vietnam and Cambodia. However, these are just expediency. In recent years, some manufacturers considered moving their production lines to the far-away African countries, in which they hope to lower the production cost to a larger extent. The more representative example is Ethiopia. In the past, Ethiopia was the synonym of poor. Today, is she the gem to be pondered in view of the China manufacturing development?
Ethiopia is at the north-east part of Africa, the suitable climate makes her become the country with largest number of livestock in Africa. There are 66 million hectare of ranch in the country, which is half of the country's land. And the leather produced in Ethiopia is famous for its high quality of natural texture and fiber structure. To some handbags and leather goods manufacturers, this is just like an unmined gold ore. Although the leather industry of Ethiopia is mature, the unemployment rate is high as 17.5%, which needs plenty of jobs to cover the surplus of agricultural labor force. For the wage, it is usually 20% of that in China, which is even lower than that in the Southeast Asia. This kind of economic environment just satisfies the huge demand of cheap labor force in China manufacturing, plus the export from Africa to USA and EU can enjoy preferential tariffs, Ethiopia would be a suitable foothold for those Chinese manufactures who plan to “go out”.
Behind the huge business opportunity would always follow by the corresponding crisis. Although Ethiopia is full of potential, she is still a developing country which the infrastructure and traffic network are not completed. It will make the transportation inefficient and logistics cost become high. In addition, because the local industrial technology falls behind and the great difference in culture, manufacturers have to pay more time and resources on discipline training and teaching machines operations, and hence lower the productivity directly. In recent years, China and Ethiopia governments drive Chinese merchants to invest in Ethiopia actively. It is because both governments know that keeping low cost advantage must have a diversity of subsidiary industry to create economies of scale, making the transportation cost of import raw materials drops.
It is still uncertain that whether Chinese manufacturers can really make use of the advantage of low labor cost in remote country to develop their business continuously. It is undoubtedly risky to go to a new place to set up factories, but manufacturers should not make no headway. They should, instead, think of some solutions solve the existing increasing production cost problem. In that way, China's manufacturing industry is able to develop in long-term!
