China's manufacturing rebounds, is made-in-China "safe" again?

By Polly Chen

China's factory activities are shrinking at sharp pace due to the U.S.-China trade war and. In October, Chinese manufacturing activity fell to 49.3, which was an eight-month low. However, China’s manufacturing showed signs of revival in November.

According to the latest manufacturing Purchasing Managers' Index (PMI) report, China's PMI rose to 50.2 in November. This index was higher than Bloomberg's estimation (49.5) and the increase was the first time in 6 months.

Generally, a reading above 50 signals growth in the sector while below 50 indicates a contraction. Does the rising index mean China's manufacturing is recovering from the trade war hit? Some economists are holding a negative answer.

Lu Ting, chief China economist at Nomura Securities, said the future is still unclear:

We don't think such a rebound suggests a bottoming out of the economy, as strong growth headwinds remain, especially from the cooling property sector and China's worsening fiscal situation.

Liang Zhonghua, chief macro analyst at Zhongtai Securities's research institute, said October's low base figure and the overseas' holiday demand might have drove the rise in November. China's manufacturing might be still under a downturn as short-term indicators are volatile.

Electronics manufacturers still choose China

Does manufacturing opportunity die in China? No. Big brands and importers still take Chinese manufacturing as a sourcing opportunity. For example, famous electronics company Panasonic is going to build a new consumer electronics plant in China.

Panasonic will place this plant in Jiaxing, Zhejiang province. This new plant will be Panasonic's first plant in China in over 16 years. Panasonic will invest $41 million in this plant to manufacture kitchen appliances like microwaves ovens and rice cookers.

According to Panasonic, the new plant will start operation in 2021. Panasonic will set up a new company to operate the plant and develop products that incorporate Internet of Things technology.

Additionally, tech giant Apple will move its Mac Pros' assemble from the U.S. to China. Apple had been assembling the model in Texas since 2013. But the training and custom tools required has slow down the production and the Texas plant has largely moved to manufacturing for other companies.

However, Apple's new Mac Pro will still have some U.S.-made components. The company has not put the most technical manufacturing part in China. An Apple spokesperson acclaimed that “final assembly is only one part of the manufacturing process.”

Find your Asia sourcing alternatives

Although China's manufacturing is still one of the strongest in the world, the impact of the high tariffs is unignorable. The “Phase two” of a trade deal looks less likely now as both sides are still struggling on “Phase One”. If you are an importer, the best way is to find your Asia sourcing alternatives beside China.

China has a mature manufacturing industry but you still can find a new Asia sourcing country accord to specific product type:

• Garment and textile: Bangladesh and Cambodia. The garment and textile industry is the pillar industry in these two countries. You can easily find garment manufacturing plants with rather low labor costs in Bangladesh and Cambodia.
• Machinery: Vietnam and Indonesia. Machinery is the top exports in Vietnam. Indonesia has reportedly manufactured more than 1.3 million automobiles in 2018.
• Mobile handset: India. India is now the world's second largest mobile phone manufacturing hub, just behind China. The Indian government is targeting to produce $190 billion value mobile handset production by 2025.
• Automotive: Thailand. Thailand is the top automotive producer in Southeast Asia and is ranked 12th globally. Besides, motorcycle is also a large industry in Thailand which generated almost $1.5 billion in 2018.

The views, opinions and images in this article are purely the author's own. Global Sources does not own responsibility for what is presented in the article.

Polly Chen is a Client Manager at InTouch Manufacturing Services, a QC firm that performs product inspections and factory audits in Asia for clients in the US, EU and Australia.