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Booze Allen: China's manufacturing-for-export boom is over

Friday, March 14, 2008 Free Headline Alerts

“The era of China as a low-cost, manufacturing-for-export market has come to an end,” says Booz Allen Hamilton, a global consultancy.

Multinational companies now must integrate their China ventures into their overall global networks if they are to use their facilities there successfully, BAH says.

In its first annual study, “China Manufacturing Competitiveness 2007-2008,” the firm found that while a stronger Chinese currency and rising wages were putting pressures on manufacturing margins, failures to deploy operational best practices and to fully leverage China as both a growth market and source of labor and products were also limiting profits.

Ronald Haddock, Booz Allen vice president, said: “China’s changing cost and currency structure have shifted, forcing companies to rethink how they structure their Chinese operations and how they perceive China in their overall global strategy. At the same time, China is increasingly a major source of product and business model innovation. We’re seeing globalization at work and China’s role has changed.”

More than half of the surveyed foreign-owned or foreign-invested companies manufacturing products in China believe that the country is losing its competitive edge in manufacturing to other low-cost nations. As a result, nearly one in five manufacturers surveyed has concrete plans to relocate or expand China operations to other countries, with Vietnam and India seen as the top alternatives to China.

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