Is China Losing Its Competitive Edge?

Companies eyeing Vietnam and India: Nearly one in five companies surveyed (17%) say they have concrete plans to relocate at least some of their China-based operations to other coun-tries. Although 88% of these corporations say that they originally chose China for its lower labor costs, they are finding that cheaper labor and tax benefits have made alternative locations more attractive. Among these corporations, Vietnam is the top alternative to China, according to 63% of this group, while 37% say India is their first choice. Among all respondents, when asked to compare China to alter-nate countries, they cited lower labor costs in those other countries as the largest differentiator, at 3.7 out of a scale of 5, indicating that China’s reputation as a source of cheap manufacturing labor is diminishing. However, the alternative countries lag China in market potential and infrastructure.