China Works blog: China manufacturing news, analysis and insights

International manufacturing companies active in China are increasingly focused on accessing growing Chinese mainland markets, rather than using the country as an export base, according to a new report.

The 2009/10 China Manufacturing Competitiveness report, co-produced by the American Chamber of Commerce in Shanghai and Boo z & Co, reveals that 83 per cent (up from 71 per cent two years ago) of surveyed companies said their primary objective for locating manufacturing operations in China was to access the rapidly diversifying Chinese marketplace.

As cost and wage differentials in inland areas of China become more attractive compared to the higher rates in coastal areas, 28 per cent of respondents are considering relocating production facilities to central and southwest China. This serves two functions, helping to reduce factor costs and locating facilities closer to rapidly growing markets across China.

“This report is a snapshot in time of a picture that is rapidly moving,” said Ron Haddock, co-author of the report, “but the old paradigm that China is just a place for cheap labour is changing.”

Manufacturing models keep getting bigger and more ambitious in China. Television news has shown images of the nation’s first domestically manufactured large civil helicopter, which completed its first test flight this week. The AC313 helicopter – which has a maximum take-off weight of 13.8 tonnes and can carry up to 27 passengers – completed its maiden flight in Jingdezhen, Jiangxi province.

The helicopter, which has been designed and manufactured by the Aviation Industry Corporation of China (AVIC), has a maximum range of 559 miles, and its uses will include “search and rescue, fighting forest fires, and assisting in fighting fires in cities,” according to state media.

China is investing heavily to upgrade its aviation design and manufacturing capacities. Earlier this week, the government announced that the draft design of China’s first home-built jumbo jet airplane will be completed by the end of 2010. The jet, codenamed C919, will feature a 156-seat and a 168-seat model. It is slated to begin production in 2011, and is targeted to be operational in 2016. The aim is to deliver a jet that is “more comfortable, less oil-consuming and more economical than competitors in the aviation market,” according to Wu Guanghui, chief designer of the Commercial Aviation Corp (COMAC).

As well as developing its own aircraft manufacturing industry, China is also the home to the only Airbus assembly plant outside Europe. Last June, the plant in Tianjin delivered its first China-assembled A320 jet.