Double digit wage increases in China cause companies to retreat to the West

There was a time when firms would base their procurement and sourcing strategies primarily on the low cost wage prevailing in China. However, in the last few years the scenario in China has changed quite to the contrary. Initially companies from the West set up their manufacturing facilities to China, seeing the opportunity of cutting costs, there is a trend of such firms retreating back to the US and other lower cost economies. The wage rate gap between China and other lower cost economies is thinning and there has been a shift by apparel and textile companies from China, suggesting that labor intensive and innovation driven industries' goods would perhaps be more economical to source from other low cost economies and the US respectively.   Author: Nikita Maureen Mendonca