Changes are happening in China, as evidenced by its recent currency devaluation and stock market slide. The country has enjoyed several decades of rocketing growth, as its huge low-wage population has provided global manufacturers with a lower cost alternative to their home workforce. However, in recent years Chinese workers have begun to enjoy higher wages as industry matures in the country, which has taken some of the shine off outsourcing to China.
Opportunities for other countries
This is providing opportunity for other low-wage countries that have an infrastructure and adequately orderly system and are therefore attractive to entrepreneurs seeking low-cost alternatives to China. A study by the Stratfor global intelligence firm has identified 16 countries that could be potential replacements for China in the international supply chain. While none of these countries could alone come anywhere near replacing China, in total they represent over 1 billion people.
These countries are marked by a workforce and economic environment that can support low-wage, highly-competitive labor demands in simple manufacturing such as garments and footwear. Another field examined by the study is cell phone assembly, marked by rather simple operations and very tight pricing. Companies in these industries can be viewed as pioneers in identifying potential sources for a competitive manufacturing location. Successful ventures in these industries are likely to lead the way to other fields of endeavor. Smaller entrepreneurs are likely to be first, as they are more agile and quick-acting than large multinationals that take much longer to move operations.
Countries are not fully developed
These countries are not necessarily governed by a comprehensive rule of law, as developed countries understand it. Many are emerging from a violent past and entrepreneurs who invest in them do so accepting a measure of risk. A close relationship must be built with influencers within the country, partnering with the people who can make things happen. They are developing countries, in the real meaning of the word. Their legal systems may not be fully established and they may not yet be entirely stable politically. Their development trajectory has only recently begun and early adopters can benefit from a workforce that is seeking the opportunity that foreign investment can bring.
The list of 16 countries
The 16 countries the study identifies are, in alphabetical order:
- Dominican Republic
- Sri Lanka