Is The Chinese Manufacturing Golden Age Over? Is Reshoring Signing The End Of Global Sourcing As We Know It?

When China underwent economic reforms and opened its doors to international business, it embarked on a transformative journey that would make it a manufacturing behemoth on the global stage. But recently media overseas have been keen on spreading words like reshoring,  decoupling, or even de-globalization. Anyone involved in manufacturing outsourcing understands that, for now, these are mostly thoughts with little reality to them. However, are we the last breaths of a golden age where everyone depended more or less on China for a large array of machinery, white goods, and fast-moving consumer goods?

Title of an article from the “Reshoring Institue – Non-profit and Non-partisan”

The above title accurately shows how ambivalent attitudes can be toward a trend called “de-globalization”. But in the end, most publications found by our team when searching on Google all agree on one point: this is not the end of globalization. However, most content found online implies that there is a willingness to take a step back and implement change to redistribute interconnections and leverage. With that in mind, let’s see what is at play regarding China.

CHINA IS STILL THE WORLD’S FACTORY

There is no doubt that, notwithstanding COVID-19 disruptions and all, China is still at the top of the manufacturing outsourcing destinations. Its intricate logistics network, dense manufacturing, and trading fabric, as well as the incredible capacity to process incoming and outgoing shipments, are still valid today. Thus, the country keeps attracting businesses seeking to buy from China and generate profits.

Taking into account the fact that the economy in leading markets is still recovering, an effort to find new partners makes it more difficult. Plus, there is usually a need for time and resources to be allocated to move production centers from one country to another.

A GLOBAL SOURCING DESTINATION THAT MATURED

While the image of Made In China still suffers from past mistakes by both Buyers and Sellers and is imprinted on large swathes of the population, the country’s ability to deliver goods to the world is still very much accepted. More importantly, in the last decade, Chinese factories have upgraded their machinery, developed new processes, and are now participating in creating new concepts, and products. A good example is how China is leading the efforts in IP with 46.6% of the world’s total patent filings in 2021.

From WIPO (Word Intellectual Property Organization: https://www.wipo.int/en/ipfactsandfigures/patents

Even if huge efforts (aka sacrifices) are made to replace, or make do without China in some areas, cutting oneself completely from the largest manufacturing hub on Earth would prove difficult to bear for the population in which access to cost-efficient goods and equipment would be restricted.

Now that we have shed some light on some very basic questions. We can conclude that sourcing from China is still a fitting choice for now. Let us take have a look at the factors that made China the top sourcing country for international buyers :  

THE ORIGINS OF THE FAME OF CHINA AS MANUFACTURING CENTER

The simple answer is that business owners seeking cost-effective manufacturing and consumers looking for affordable goods have led the trend to buy from China at very low prices to sell back in their home countries. As simple as that! The need for some businesses to generate improved margins invest, and grow was the main reason that pushed daring entrepreneurs to the doors of China.

IN RECENT YEARS CHINESE COSTS HAVE GOING UP, BUT SO HAS QUALITY

In the past, the lower costs associated with Chinese labor and materials often translated to products of lesser quality. This was not only due to the lack of money at the time, but also to the lack of knowledge, or due diligence from some Buyers. However, years of industry practice have significantly elevated the standards. Chinese manufacturers are now well-versed in international standards and have gathered extensive experience with partners all over the globe. Production and supply chain management is now more than ever better fit to meet specific market demands. However, as outward trade boomed, China’s population accessed to higher living standards (and even lifted some from poverty). Wage levels in 2023 in the manufacturing sector are still increasing.

From  CEIC, https://www.ceicdata.com/en/china/average-wage-by-industry-urban-nonprivate

BUSINESS SERVICES AVAILABLE EVERYWHERE TO FACILITATE EXPORT

The world’s factory is such an expansive place that it helped a myriad of satellite businesses to flourish, focusing on exports only. New logisticians, shipping agents and forwarders, lawyers and consultants, Chinese quality inspection companies, testing laboratories, and certification entities appeared and participated in the strengthening of China’s leading position as a manufacturing partner.

For example, a China inspection company performs rigorous quality checks before products are shipped overseas, ensuring they meet or exceed customer expectations. Business owners can collaborate with Chinese manufacturers without the looming anxiety over quality control with a third-party inspector in the mix.

Employing an inspection agency can further streamline the process when considering outsourcing manufacturing. These agencies conduct on-site visits and random sampling to provide an exhaustive analysis of the products. If discrepancies are found, the manufacturer and the business owner are alerted, allowing for immediate corrective action.

This proactive approach not only safeguards investment but also enhances customer satisfaction by delivering products of superior quality. Additionally, the utilization of such inspection services can prove to be a cost-effective strategy, preventing potential defects or deviations and ultimately streamlining your production operations, ultimately contributing to the success and reputation of your business on a global scale.

Conclusion

China’s success story as a manufacturing powerhouse would not have been possible without a sheer will to generate increased margins from developed countries’ buyers. However, in today’s world, this comes with a price. Many countries rely on China for the supply of so many daily products, machinery, electronic equipment, etc. that world trade actors have decided to trigger a “reshoring” trend.

It is unlikely that we are living in the last years of China’s manufacturing outsourcing golden age. However, rising wages and costs, and a more regulated space have played against what was once perceived as an Eldorado of global sourcing. In 2023, China’s manufacturing density, and logistics network is still unequaled though.

If your business aims to benefit from affordable and fast-paced bulk manufacturing, China remains an excellent choice. With the option of employing a quality inspection agency in the country, concerns about product quality can be effectively addressed. Therefore, China stands as a reliable option for businesses worldwide seeking cost-effective, quality manufacturing.