Hyderabad: China continues to be the most suitable location for global manufacturing among 48 countries in Europe, Americas and the Asia-Pacific in the year 2020, according to a new report by property consultant Cushman and Wakefield.
The consultant, in its Global Manufacturing Risk Index (MRI) report for 2020, said that the US has retained the second position, while India has moved one place higher to rank third. The rankings are based on the consultant’s baseline scenario that does not consider impact from the ongoing Coronavirus pandemic but takes into account the US-China trade dispute. The scenario gives equal importance to a country’s operating conditions and cost competitiveness.
“Diversification combined with a move up the value chain in order to focus on telecom, hi-tech (40% of robots produced globally are made in China), and computers have helped the Chinese manufacturing sector remain somewhat resilient to trade wars,” the report said.
Interestingly, the report noted that despite government initiative to attract manufacturers, India has not been able to make investments on the scale of China to build and modernise its infrastructure networks.
However, it said that keeping in focus the US-China trade war, India stands to benefit from any plant relocations from China to other parts of Asia. Though reforms to both land and labour laws are critical to India’s success as a global manufacturing location, the report added.
The world’s two largest economies China and the US have been locked in a bitter trade battle for some time now. The dispute has seen both nations impose tariffs on one another’s goods. While US President Donald Trump has long accused China of unfair trading practices and intellectual property theft, China seems to be acting on its perception that the US is trying to curb the Asian nation’s rise as a global economic power.
Talking about the US, the report said that with the rapid adoption of technology into production processes, the country even with its higher-cost workforce could start to be better aligned to compete with China for manufacturing jobs.
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Cushman and Wakefield’s annual Global MRI survey scores each country against 20 variables that make up the three final weighted rankings -- conditions, cost and risk.
China has also retained its lead position under the MRI’s cost scenario, which places greater emphasis on cost reduction to give a higher score to countries where operating costs, including labour, are lower. Vietnam and India jumped to second and third positions, respectively, in cost scenario rankings.
“An ample labour supply, a large and expanding domestic consumer market, low currency value and government incentives including inexpensive land, free infrastructure and generous financial incentives help secure China’s top position on our cost ranking,” the report said.
Under the risk scenario, which takes into account rising geopolitical risk and favours countries with lower levels of economic and political risk, China has been ranked at the fifth place despite its trade conflict with the US. “Given the possible post-pandemic shift in sourcing and supply chain strategies and evolving geo-political risks, China’s ranking may fluctuate in the future. However, it is too early to predict with accuracy how fast these developments may occur or the significance they may have on future rankings,” the report said.
At the top of the risk scenario ranking has been Canada followed closely by the US. “Natural resources, ample labour pools, federal and state incentives, large consumer markets and infrastructure make these countries competitive, especially in a less predictable and less secure global environment.” India has been ranked 30th in the risk scenario.
(ETV Bharat Report)
