Rising costs to operate a business

Made in China
by Nemo's great uncle via FlickrIt might not come as a surprise for many companies in China, but now also the leading financial magazine Caijing tells us that doing business in China is becoming more expensive.

Low-cost manufacturing centers in other countries are outshining China as attractive destinations for foreign businesses, according to a report by the American Chamber of Commerce in Shanghai and consulting firm Booz Allen Hamilton. Among manufacturers surveyed for the report from the United States, Japan and Western Europe, more than a half think the rising value of the yuan and increasing labor costs have diminished China's competitiveness as a base for inexpensive manufacturing.

The costs, according to the survey, increase up to ten percent per year. On top of that an immature logistical system, lack of qualified staff, a deteriorating environment and problems with intellectual property. Still, most companies are prepared to ride out the storm, says Caijing.

Some are ready to take the heat. Su Laide, president of the Taiwan Compatriot Investment Enterprises Association of Kunshan, in the Yangtze River Delta, told Caijing that Taiwanese companies have suffered 30 percent to 40 percent increases in costs in the past two or three years, mainly due to rising costs for labor and materials, the cancellation of tax preference policies, and yuan appreciation. However, only a small group of these enterprises have been closed or moved from the region, he said. Most Taiwanese companies in Kunshan are high-tech manufacturers.
“None of our member companies withdrew from the market under rising costs,” said James M. Zimmerman, chairman of the American Chamber of Commerce in China, adding China has many opportunities for U.S. companies to explore for the long term.