China's Labor Cost Advantage

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Peter v G., Netherlands

China's Labor Cost Advantage

Many people believe (as I did) that China has a clear cost advantage in manufacturing from cheap labor. Not so according to Research conducted with funding from the Alliance for American Manufacturing...
In China's steel industry, large government energy subsidies are actually responsible for keeping steel prices down. In 2007, energy subsidies to Chinese steel reached $27 billion. Labor costs account for less than 10% of the total costs to manufacture Chinese steel.

  Neeton, China
 

Industrial Chain

But the steel industry in China are almost at the low level of the industrial chain, which can only produce less value in the chain, and that value can only make these workers not to starve to death. Average $3000 per year is their income. So is that "advantage". It's just advantage in that less value part of the chain.

 

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