NYT: Labor Costs Rise, and Manufacturers Look Beyond China

[Omaha Steve]

http://www.nytimes.com/2008/06/18/business/worldbusiness/18invest.html?_r=1&ei=5043&adxnnl=1&oref=slogin&partner=EXCITE&adxnnlx=1213747937-sGtc4rUfiyjuqqkcq1KRXA


Justin Mott for The New York Times

When it comes to multinational manufacturing, Vietnam is fast becoming the new China. The electronics maker Samsung is building a factory in Yenphong Industrial Park, in Yenphong, Vietnam.


By KEITH BRADSHER
Published: June 18, 2008

HANOI — Canon is no longer building or expanding factories in China, but the company is doubling its workforce at a printer factory outside Hanoi to 8,000.

Nearby, Nissan is expanding a vehicle engineering center. Hanesbrands, the underwear company based in Winston-Salem, N.C., is building two new factories here, as is the Texhong Textile Group from Shanghai.

China remains the most popular destination for foreign industrial investment in the world, attracting almost $83 billion last year. But a growing number of multinational corporations are pursuing a strategy that companies and analysts call “China plus one,” establishing or expanding Asian bases outside China, particularly in Vietnam.

A long list of concerns about China is feeding the trend: inflation, shortages of workers and energy, a strengthening currency, changing government policies, even the possibility of civil unrest someday. But most important, wages in China are rising close to 25 percent a year in many industries, in dollar terms, and China is no longer such a bargain.

More than corporate profit margins are at stake. When the cost of making goods in Asia rises, American consumers inevitably feel pain. The Labor Department said Thursday that import prices were 4.6 percent higher in May than a year earlier for goods from China and 6.4 percent higher for goods from southeast Asia.

Companies are using the China-plus-one strategy to mitigate the risks of overdependence on factories in one country.

FULL story at link.