Why Outsourcing from China Will Cost You More This Year...

Filed in archive Outsourcing on February 6, 2008

If you haven't figured this out already, let me break the bad news to you: outsourcing from China is going to cost you more this year than it did last year. If your business relies on outsourcing from China, you should plan on that extra expense.

Why? China business success stories pointed out at least four reasons last month. The biggest factors are increased labor costs and changes in China's tax laws.

China has changed the formula that used to refund the value added tax (VAT, basically a sales tax) on items manufactured for export. That will increase the cost of items exported from China. It's part of a policy to reduce exports, with the goal of reducing the trade deficit.






China has also recently implemented a new labor law designed to reform the employment process and raise worker wages. Higher wages translate into higher manufacturing costs.

You can also blame some of the increased cost of outsourcing on politicians getting their wish. The President, along with congressmen and senator on both sides of the aisle have been clamoring for a stronger yuan. And now they're getting just that. The result? What used to cost 95 cents now cost $1.10 without changing it' price in yuan.

China Business Success Stories has much more detail on why outsourcing will be more expensive this year. You should take a look at their piece...