China’s position as the country of choice for manufacturers is coming under threat because of growing economic problems.
For many people in the West, the issues being highlighted will sound familiar as the reasons given for closing factories and moving production to China in the first place.
Chinese factory wages have rocketed in recent years – quadrupling in the last 10 years alone, and the building of factories is in decline as younger people choose not to work elsewhere.
In addition, the country’s labour force has begun to shrink because of the Chinese ‘one child’ policy and an increasingly ageing population.
China’s relatively recent decline has led to a boom in other countries in the Asia Pacific region, such as Cambodia which is helping to underline their growing influence as emerging economies.
Investment moving out
Foreign firms are increasingly setting-up the operations in cities like Phnom Penh where wages are still a fraction of those paid in China.
American and Japanese manufacturers are at the front of the queue to build factories which are making touch screens for mobile phones while European companies are also showing a growing interest in shifting production lines to Cambodia as well.
Another major reason for the trend towards Cambodia is that manufacturers want to reduce their reliance on China.
However, one of the downsides for this headlong rush into Cambodia is that increasing demand for workers is seeing their wages begin to rise too – bringing millions of people out of poverty.
Direct foreign investment in Cambodia has rocketed by 70% between 2011 and 2012 while slipping 3.5% in China last year.
Poor countries gaining
China has seen foreign investment rise every year since 1980 except for 1999 when weathering the financial crisis in Asia and again in 2009 during the global financial crisis.
Foreign investment in China still dwarfs that in every other country – while China had £78 billion of investment pumped into the economy last year, Cambodia only saw £1 billion.
Investment experts regularly highlight the potential of emerging economies and the increasing investment in countries like Cambodia is bringing with it opportunities to enjoy good profits.
Cambodia’s investment success is also being recorded in Thailand, Vietnam and the Philippines.
One of the knock-on effects of such investment in these countries is not just that people are getting richer but that their working conditions are also vastly improved.
One Belgian company, which is producing microfibre sleeves for sunglasses, has brought in employee benefits which were previously unheard of in Cambodia such as medical and accident insurance, free lunches and education allowances.
