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China Daily (Hong Kong) - - FRONT PAGE -

In a re­cent in­ter­view with the me­dia, Cao De­wang, chair­man of Fuyao Group, the largest au­to­mo­tive glass sup­plier in China, said he is set­ting up a fac­tory in the United States with a to­tal in­vest­ment of $1 bil­lion, cit­ing con­cerns over high taxes and ris­ing costs back in China.

Cao’s plan has caused heated de­bate over whether China still en­joys man­u­fac­tur­ing cost ad­van­tages over the US.

A 2015 re­port pub­lished by the Bos­ton Con­sult­ing Group com­par­ing man­u­fac­tur­ing costs be­tween China and the US found that China’s ad­van­tage over the US de­clined from 14 per­cent in 2004 to 4 per­cent in 2014. It also cited in­creased salaries, the yuan’s up­ward ex­change rate against the US dol­lar and ris­ing en­ergy prices as three ma­jor fac­tors putting in­creas­ing cost pres­sures on China’s man­u­fac­tur­ing sec­tor.

Un­doubt­edly, as the head of a lead­ing man­u­fac­tur­ing com­pany, Cao’s com­plaints about the ris­ing costs such en­ter­prises now face in China should at­tract at­ten­tion from de­ci­sion-mak­ers. In the con­text of China’s de­mo­graphic div­i­dend grad­u­ally fad­ing, ever-grow­ing man­u­fac­tur­ing costs have be­come a ma­jor con­cern amid the coun­try’s eco­nomic trans­for­ma­tion and up­grad­ing.

The mea­sures drummed up by US pres­i­dent-elect Don­ald Trump to prompt US man­u­fac­tur­ing op­er­a­tions to re­turn to the US ter­ri­tory and the rise of man­u­fac­tur­ing in Asian coun­tries such as Viet­nam, In­done­sia and In­dia have fur­ther ex­ac­er­bated con­cerns over the prospects for China’s man­u­fac­tur­ing sec­tor, which is fac­ing fiercer in­ter­na­tional com­pe­ti­tion with the tan­gi­ble dis­ap­pear­ance of its de­mo­graphic div­i­dend.

The rise in China’s la­bor costs, a re­flec­tion of Chi­nese peo­ple shar­ing the fruits of their coun­try’s fast-grow­ing econ­omy, should be en­cour­aged. In the mean­time, the author­i­ties should ad­dress the high en­ergy costs and heavy tax bur­den that se­ri­ously hin­der the global com­pet­i­tive­ness of the Chi­nese man­u­fac­tur­ing sec­tor.

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