Data from fDi Markets shows that manufacturing FDI projects in China have declined significantly – by 37% – for January to October 2009 when compared with the same period in 2008.
If the average number of initiatives recorded continues to fall at same trajectory for the remainder of the year, China will have the fewest manufacturing projects on a yearly basis ever recorded by fDi Markets.
While the global recession has taken its toll, issues such as labour costs, energy price rises, product recall and counterfeiting have all contributed to the decline in investments, and original equipment manufacturers are now starting to look at other regions, including eastern Europe and Latin America, to satisfy their production needs.
“We’ve seen a flurry of people jumping on the bandwagon to move from China,” Charlie Barnhart, co-founder of outsourcing company Charlie Barnhart & Associates, told Electronic Business. According to Mr Barnhart, the trend began in 2006 when companies saw that countries such as Mexico were less expensive when it came to shipping, have fewer procurement problems and minimal rising labour costs.
Companies have been finding that the most efficient means of outsourcing is through end markets – so for North America that means Mexico, while western Europe is looking to eastern Europe.
There have also been increased problems with the supply chain from China and many suppliers have gone out of business during the recession. “Companies call their suppliers to see what is going on and nobody answers,” said Mr Barnhart.
In related news, Toyo Tire & Rubber Co recently announced it is planning to move its production of consumer lines for the US out of China to plants in Japan because of the Barack Obama administration’s decision to impose higher tariffs on Chinese-made passenger and light truck tires.