29 Apr 2013
Cambodia has seen a surge in the number of foreign companies moving their manufacturing away from China last year. This is all down to one simple reason: they want to limit their overwhelming reliance on China.
Due to a shrinking labour force; an aging population, youth no longer interested in factory jobs and the one child policy, labour costs have quadrupled over the last decade in China.
Multinationals, however, are finding that they can never truly escape China’s vast manufacturing capabilities. The available workforce, the economy and electricity output of most Southeast Asian countries are drastically smaller than in many Chinese provinces. As these companies move away from China, they quickly exhaust these resources, driving wages up sharply.
Direct investment from foreign companies in Cambodia has risen 70% since 2011. Thanks to these large investments, a vast amount of employees are starting to make their way out of poverty and destitution.
Although wages are lower in Cambodia, foreign investors still have to rely on China for the short-term future. Productivity in China still surpasses Southeast Asian countries – for example Cambodian workers sew 15 – 30% fewer sleeves per day than their Shanghai counterparts, but productivity in Cambodia has been catching up.
Nowadays, companies are building new factories in Southeast Asian countries to supplement operations in China and due to the increasing risks of manufacturing in China, we should see an increase in the number of companies shifting to other countries.
Read the full article on Manufacturers jumping ship from China to Cambodia