Is China losing its outsourcing shine?
September 10, 2008
The outsourcing industry all over the world is facing lots of trend-changers. Earlier this year, it was the dropped value of American Dollar in the international market; now the fuel prices are putting pressure on shipping and transportation issues required to fulfill the needs of outsourcing. No wonder that China is starting to face some problems here.
Lots of American and European companies have outsourced their manufacturing and production units to China. However, it has been noticed that the cost of sending a standard 40-foot container of goods has jumped from $3,000 in 2000 to about $8,000 in 2008, which directly means that the profits are facing the pressure.
It could be recollected that the model of outsourcing to China emerged at a time when oil was going for $20 a barrel—there is a third digit now in this price and it is said that the oil prices could hit a new high of $ 200. It is quite clear that China will be facing tough task to retain the outsourcing assignments from different countries due to increased rates of transportation and shipping.
Though I am not from China, I know how cost factors can shift the market-trends. When American Dollar was facing decrease in its value, Indian export suffered a massive downsize of 18%. Outsourcing and export both suffered due to the price value of American Dollar. Yet, it is also true that all the outsourced companies from China can relocate their business back again to their places due to the investment costs and set-up costs.
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