By Tim Hanley - July 07, 2014
A few weeks ago, I had the privilege to host an Asia Pacific Regional Manufacturing Summit and could not have asked for a better venue than Shanghai, China – a vibrant and important marketplace for Deloitte member firm global manufacturing clients. The event focused on the evolving industry themes impacting the region.
Talent was one of the first themes discussed. A guest speaker from the US-China Business Council, highlighted the rising cost of talent in China, citing an average of eight to 10 percent increases in annual salaries compared to the average rate of three percent in markets like the United States. As Chinese manufacturers aim to move up the global value chain (read Deloitte China’s report “Transforming from world factory to smart manufacturing”), wage inflation will continue to be a challenge for both local and international manufacturers. However, it does not appear to have significantly dampened investment interest in China.
Urbanization was another theme highlighted and an important trend to watch. It is just one of the factors attracting investment into China. A speaker from The Economist Group provided the audience with fresh insights on the urbanization patterns occurring in China. Did you know that China’s urbanization rate is expected to increase to 61 percent of the country’s total population by 2020 (up from around 50 percent today), and to 67 percent by 2030? That translates to an urban population of around 940 million people by 2030 (up from 670 million in 2010) with most of the growth in mid-size cities like Guangdong, Henan, Hebei and Shandong. While significant due to the size of the population, China’s urbanization rate actually falls behind the average urbanization rate across OECD economies of just below 80 percent in 2010. Understanding this megatrend will likely be important for multinational and local manufacturers alike as they consider how and where to grow their business in China.
Harnessing alternative sources of energy was another theme highlighted at the event. The energy agenda, as an example, is a topic of interest to Japanese manufacturers as the country strives to find sustainable alternatives to nuclear power with a view to renewables including solar and hydrogen fuel. During the event, I also learned that Japanese manufacturers are driving increased investment in research and development in an effort to build technology leadership and grow its domestic market. Long recognized as leaders in globalization, Japanese companies are continuing to seek growth in emerging markets such as China and Southeast Asia.
As always, I am interested in exchanging perspectives on industry and market trends and developments, so please do not hesitate to leave your comments below or tweet me @TimPHanley.
Tim Hanley is the Global Leader of the Manufacturing Industry group of Deloitte Touche Tohmatsu Limited (DTTL). In his global industry leadership role, he directs strategic initiatives and investments to grow Deloitte member firm market share within the manufacturing industry. During his distinguished 35-year career, Hanley has led teams serving all business aspects, including consulting with top management regarding organizational financial strategy development and execution, acquisitions, and market development.