China Manufacturing Costs Nearly Equal to U.S.

Aug 11, 2015 By eChinacities.com

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China's manufacturing costs are now almost the same as those in the United States, according to a report by Boston Consulting Group (BCG).

In the index released by BCG, America's manufacturing costs are rated as 100 (as a reference point), while China's is almost the same at 96. This means, that it costs $1 to manufacture a product in the U.S. and $0.96 to manufacture it in China. The gap between the two countries has narrowed dramatically in recent years.

In early August, The New York Times published an article on China's textile industry which noted that it costs 30% to produce cotton textiles in China than it does in the United States. The article noted that China's mills have begun to set up factories in the U.S.

Looking at the textile industry as a microcosm of Chinese manufacturing, it is clear that the industry is on the decline.

China's manufacturing faces a lot of pressure, according to the BCG report. Production costs in China have continued to rise over the past 10 years. There are three factors behind this. First, salaries of workers have improved from $4.35 an hour in 2004 to $12.47 an hour in 2014. Second, the RMB has risen against the US Dollar by 35% in the past 10 years. Third, energy in China has become more expensive, from $7 per kilowatt-hour in 2004 to $11 in 2014.

Source:inews.qq.com

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Keywords: Boston Consulting Group U.S. manufacturing China manufacturing

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While this article is true, it's not clear on the real reasons, which are the following: 1) Chinese labor costs are rising, but still dirt cheap (not anywhere near $12.47 as this article states). That would mean a Chinese laborer would make like 80 RMB per hour; judging by job ads I see, 80 RMB per day is more on par with average wages. 2) American productivity is far superior. That's due to a mixture of better technology, more efficient operations, and simply more skilled workers. So, an American worker may make six times what a Chinese worker does, but production of one American worker is probably equal to five Chinese workers. 3) Energy costs in America are lowering.

Aug 19, 2015 03:04 Report Abuse

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