China is Still Most Competitive Manufacturing Hub, Say CEOs

China remains in first place in manufacturing competitiveness, both today and five years from now, with business executives citing a number of key strengths: labour and materials cost advantage, strong government investment in manufacturing and established supplier network, according to the 2013 Global Manufacturing Competitiveness Index report from Deloitte Touche Tohmatsu Limited’s (DTTL) Global Manufacturing Industry group and the U.S. Council on Competitiveness.


“The leadership status of China in manufacturing competitiveness is expected to remain in the next couple of years," says Rosa Yang, Co-leader, Manufacturing Industry Group, Deloitte China. "China’s competitiveness is bolstered by conducive policy environment either encouraging or directly funding investments in science and technology, employee education and infrastructure development.”


Based on an in-depth analysis of survey responses from more than 550 chief executive officers (CEOs) and senior leaders at manufacturing companies around the world, the report confirms that the landscape for competitive manufacturing is in the midst of a massive power shift, in which 20th-century manufacturing stalwarts like the United States, Germany and Japan will be challenged to maintain their competitive edge to emerging nations, including China.


Ricky Tung, Co-leader, Manufacturing Industry Group, Deloitte China, said the CEO ratings seem to suggest China is becoming more and more a developed nation competitor than its emerging economy counterparts.


“In addition to supportive policies, China still has relatively lower labour costs and is above average in the attractiveness of its corporate tax rates," says Tung. "With its focused efforts to localize supply chains and create innovation hubs, China is also seen by CEOs as the only emerging nation offering the same supplier network advantages as developed nations.”


Also in the top three spots include Germany and the U.S., but, according to the survey, both fall five years from now, with Germany ranking fourth and the United States ranking fifth, only slightly ahead of the Republic of Korea.


The two other developed nations currently in the top 10 are also expected to be less competitive in five years: Canada slides from seventh to eighth place and Japan drops out of the top 10 entirely, falling to 12th place.


Overall, in five years, key emerging nations are expected to vault forward in the Index: Brazil jumps from its current eight place slot to third place and India jumps from fourth to second place. China remains firmly in first place.


Not surprisingly, frontier markets in Asia such as Vietnam and Indonesia are also on the rise.


The global CEO survey results echo the view that while China and India are still prominent in discussions, manufacturers are turning their focus to these frontier markets for growth to capture both the growing local consumer demand and to serve as strategic manufacturing hubs in the global value chain.

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