Now that the Beijing Olympic Games are over what will happen to China’s booming economy? Will it continue to enjoy its position as the world’s emerging manufacturing powerhouse? Or will rising inflation, a growing green consciousness in the west and a slowing global economy have its impact on China as the primary location for outsourced manufacturing?
The economies of most countries that have hosted the Olympics suffer in the wake of the games. According to Datmonitor, economic growth in China is expected to drop from 11.4 per cent in 2007 to less than ten per cent in 2008.
But while a drop in China’s growth may be inevitable, is there an underlying shift in foreign strategic investment plans and sourcing policies?
Figures published recently in the “Financial Times” pointed to the fact that foreign direct investment from the European Union into China fell steeply last year from 6bn euros in 2006 to 1.8bn euros. In contrast, India experienced an increase from 2.5bn euros in 2006 to 10.9bn euros last year. And Russia saw foreign investment soar from 10.6bn euros to 17.1bn euros.
One explanation was that European businesses were looking to central and eastern Europe as a plausible alternative to China for moving production.
Interestingly, this supports the findings from the Supply Chain Standard/YouGov survey conducted in the spring which found that of those surveyed who outsource the manufacture of goods to low-cost economies, 71 per cent saw an impact of rising oil prices on their sourcing decisions. Most supply chain directors and purchasing directors surveyed had noticed an increase in costs for goods manufactured in China and sound bites indicated that many are looking to bring manufacturing closer to home, with several citing eastern Europe as a likely location.
I’m sure China’s economy will continue to blossom. |Just how the UK’s will be doing after the 2012 Olympics is another question.