China will no longer be the “default” sourcing destination

Panjiva, an online search engine with detailed information on global suppliers and manufacturers, has joined those experts predicting a substantial boost in sourcing expenses.

“In 2011, manufacturing costs will rise,” Panjiva (http://panjiva.com/) CEO Josh Green, noted in a recent blog post.

He added that for years, China’s huge labor pool helped keep global manufacturing costs down, but wages are escalating.

“China’s move toward a more flexible Yuan amplifies the effect of wage increases. But perhaps the most important thing going on in China is the rise of its middle class — a middle class that is demanding goods and services,” Green added.

In a poll conducted with its clients, Panjiva learned that it was “jarring” for Americans to see China prosper while the U.S. held on for dear life through the Great Recession.

“Meanwhile, Chinese leaders have over a billion mouths to feed and are unwilling to take measures that could jeopardize additional growth,” Green said. “In 2011, we will continue to see an economic recovery that is uneven, and we will continue to see fear about the future as a driving force in shaping government policy.”

Green has also joined the chorus against protectionist rhetoric and more protectionist policies. While he does not see an all-out trade war, he is predicting “flare-ups” that will create headaches for sourcing executives in a variety of industries.

As a consequence, said Green, China will no longer be the “default” destination, and sourcing teams will need to grow their capabilities outside.
More of his forecast can be found at:

http://panjiva.com/blog/2011/01/03/global-sourcing-what-to-expect-in-2011#respond