You just can’t get the same scale or depth or infrastructure anywhere else

HONG KONG: For all the hand-wringing over the rising cost of sourcing from China, the country’s scale of manufacturing operations, the depth of its supply base and its famed infrastructural advantages make it a difficult country for manufacturers to leave for elsewhere, say economists, business consultants and businessmen.

“Where else but in China can you source the huge quantity of goods that Wal-Mart needs, for instance?” asks Jing Ulrich, chairman of China equities at JP Morgan Securities. Countries like Vietnam and Bangladesh may be able to take some marketshare from China in some industries, but they’re not going to be able to replicate the huge scale of manufacturing that China has built up over the past 30 years, she adds.

China still offers cost advantages in many verticals, points out Richard Brubaker, managing director of China Strategic Development Partners, a Shanghai-based business consultancy. “It’s hard for many manufacturers to leave China because there is no business case to move.”

China’s supply base is huge, and entire industries - such as automobiles and computers - have Tier 1-3 suppliers in place in China, observes Brubaker. “If a particular group decides to move out of China, for whatever reason, it loses out on the scale of support.”

Hong Kong-based garments manufacturer M Arunchalam, who sources from China for the world markets, agrees. Earlier this year, he moved a fifth of his supply lines from China to Vietnam and Bangladesh citing rising wage costs and tighter enforcement of pollution control laws. But even he acknowledges that it is hard for him to go to India, for instance, and replicate his China model, given the limitations of infrastructure there.