China remains number one location for manufacturers

Manufacturers are facing a number of pressures on their Chinese operations such as product safety concerns, rising labour costs, increased cost of raw materials and higher inflation. However, according to a survey by Deloitte’s Manufacturing Industry Group, China remains the number one location in which manufacturers plan to expand their operations. 68% of manufacturers are likely or very likely to establish or significantly expand their operations in China in the next five years. The number is even more pronounced amongst manufacturers with revenues in excess of $1bn, with 84% expecting significant expansion.

Of those planning to invest in China, 82% expected to invest in production operations, 78% plan to expand their sales and distributions operations whilst 44% expect to invest in R&D.

China is not the only emerging market in which manufacturers will invest but it is certainly the most dominant. 47% of manufacturers plan expansion of their operations in South East Asia or Eastern Europe, 45% in India and 44% in Latin America.

Jane Lodge, UK Manufacturing Industry Leader at Deloitte, said: “The evidence is clear: China will remain at the forefront of operations for global manufacturers. However, the events of this summer and the increasing cost pressures will make them more aware of some of the potential risks of operating in emerging markets. Until now, manufacturers have not always reviewed the risks holistically. Success in emerging markets requires an intelligent approach to managing the risks and opportunities necessary to drive future growth, while avoiding risks that have no upside potential.”