Switching from China …

At least 35 per cent, or $400 billion worth of goods, that are sourced from China could shift to countries such as India, Thailand, Vietnam among others over the next 10 years, according to a study by US-based retail and supply chain solutions firm DCB and Company.

A sharp spurt in transportation cost and an appreciating yuan is forcing global retail chains such as Wal-Mart, JC Penny, Target and Carrefour to look at India and other southeast Asian countries to source products with price points of $25 and below.

What are the implications for other economies and, what will be the impact in the informal economy?

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3 Responses to Switching from China …

  1. Byron Song says:

    The impact can already be seen in China. The raising competitions from other Asian neighbours combined with the recent global financial crisis storm have forced thousands of SMEs in the Southeast China to closedown. Losing advantages of exporting cheap products, these SMEs were unable to find alternative domestic or international market. Some friends from my logistics MSc class who went back to find a job in China complain about how difficult to find a job now.
    Does this mean logistics lose its importance when the external economic environment declines? We see that in an after-war economy like Iraq, T L may play an important role in the transformation from Military Logistics, Humanitarian Logistics all the way to Logistics in a stable environment. Then what role will T L be playing in today’s China where major economic changes (from cheap low-quality to value added, from exporting oriented to more domestic oriented) are undergoing?

  2. robjbell says:

    Interesting that you should highlight the impact of global factors on the Chinese economy. Interesting how China’s growth has been so much to do with exports whilst India – with low levels of export – is the reverse.

    I would not wish to claim that T L has the solution. However, if we accept that there is a point at which a market is, in logistics terms, stable; that outlets and points of purchase exist and, that consumers can buy then, the transition to get there from either a purely local economy or, one dependent on humanitarian aid is the work of Transformatioanl Logistics.

    Take the situation you describe. It is likely that outside of places like Shanghai and the Pearl River Delta – less developed regions to the west and north – there are many issues that need addressing in order to “connect” this less developed region to the wider domestic market and then, beyond to global markets. In fact, these could be the areas that will compete with India and Vietnam far more seriously than Shanghai etc. Aftar all, with high living costs it is more likely that Shanghai will look to move up the value chain and a completely different agenda.

    Maybe the World Bank LPI could be completed for different regions to illustrate the variability of performance across China’s 22 provinces and five autonomous regions. It is likely that this will also highlight differences in working conditions, wages and, in levels of skill. The same issues apply in all of the rapidly growing countries of the BRIC (Brasil, Russia, India and China) and, the next 11. None of these countries are homogenous and all of them are characterised by signifcant regional differences.

    For example, some regions are equipped solely for local / regional markets; others can handle a wider domestic market and, some regions are operating as Global Gateways. This variable hinterland is a key issue and an area where T L research could be valuable.

  3. robjbell says:

    Question to Byron re China. What evidence is there of a strategy to apply the learnings and experience in the Pearl River Delta and, Shanghai to other Regions? Is there a “best practice” / knowledge transfer approach at work?

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