If you are sourcing from China because it is part of your LCCS (Low-Cost Country Sourcing) Strategy, you will need to find a new low cost country to source from. Just like India is no longer a low cost country for call centers and outsourced support, it won’t be long before China is no longer a low cost country for manufacturing. As clearly pointed out in this recent McKinsey Quarterly article on What China’s five-year plan means for business, the plan targets:

• a 13% increase in minimum wages each year,
• an annual increase in household income of 7% each year,
• new policies for pricing energy, raw materials, and water … that will increase costs further … and
• tighter environmental regulations … that will increase costs even further.

In other words, your labor costs will be 84% higher within five years. And your raw material and environmental disposals cost will likely see a comparative price increase. Low Cost Country? Not anymore!