The “China Price” dynamic has gone through several iterations.
First, Western manufacturers were panicked over the prices coming from Chinese competitors, which were often 20-30 percent less than they could make it for domestically.
Next, companies in almost all industries looked to outsource production, directly or indirectly, to China’s increasingly sophisticated manufacturing sector. While many found the true net savings somewhat elusive or at least less than expected, unit manufacturing costs went down substantially for most companies that took this path.
Then, given the huge growth in manufacturing and the Chinese economy overall, Chinese labor started to rise substantially. In 2007-08, this really began to eat into the savings companies had achieved by moving to China. As a result, especially for low value-added manufacturing, many companies moved further west into inland China chasing lower wage rates, or considered other lower costs countries such as Vietnam.
